[Click eStock] "Kolon Industries, Expected Best Quarterly Performance in 2Q"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment maintained its 'Buy' rating and target price of 95,000 KRW for Kolon Industries on the 18th, expecting the company to record its highest quarterly performance since Q2 2012 in the second quarter of this year.

Shinhan Financial Investment estimated Kolon Industries' operating profit for Q2 to be 91.7 billion KRW, a 149% increase compared to the same period last year. Operating profit from industrial materials is expected to increase by 321% to 42.5 billion KRW. Jinmyung Lee, a researcher at Shinhan Financial Investment, analyzed, "The price increase of tire cords due to tight supply and demand and the recovery of front-end demand will continue to improve the performance of subsidiaries," adding, "The export prices of key products such as tire cords and KPL are estimated to have risen by more than 9% and 16%, respectively, compared to the previous quarter."

In fashion, profit growth of 100% year-on-year is expected due to performance improvements centered on outdoor and golf apparel. Film is expected to continue benefiting from product mix improvements, and chemicals are anticipated to see profit increases compared to the previous quarter due to steady demand for epoxy resins.

It is forecasted that Kolon Industries will enter a structural growth phase through the upcycle of industrial materials and facility investments. Currently, the tire cord market, a core product of industrial materials, has entered an upcycle. Demand remains solid due to improvements in the automotive industry, while supply is tight due to limited capacity expansions. The researcher stated, "The only scheduled expansion is Kolon Industries' facility in Vietnam," and added, "Considering that the customer product certification period is at least two years, the demand-dominant situation will continue, leading to sustained price increases."

Shinhan Financial Investment projected Kolon Industries' operating profit for this year to increase by 103% year-on-year to 309.6 billion KRW, expecting that strong performance and expanded investments will lead to a structural growth phase. The company is preparing for aramid capacity expansion in the first half of the year, and plans to expand its hydrogen business focusing not only on moisture control devices (global No. 1) but also on key materials for hydrogen fuel cells such as polymer electrolyte membranes (PEM) and membrane electrode assemblies (MEA). Biodegradable plastic (PBAT) is scheduled for release in the second half of the year, with production capacity expected to expand to 50,000 tons by 2023.

The researcher said, "Kolon Industries' stock price has risen 69% since the beginning of the year, highlighting its mid- to long-term growth potential due to improved tire cord market conditions and aramid capacity expansion," adding, "However, it is still considered to be in the early stages of growth, and in the current situation where the chemical sector is undergoing a correction, it will be the best alternative."

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