National Pension Service Sells Hwasung Entertainment and Buys Hanse Industrial This Month

Changes in Stocks with Over 5% Shareholding
Reduction Also in Dong-A ST and POSCO

[Asia Economy Reporter Park Jihwan] It has been revealed that the National Pension Service (NPS) reduced its investment proportions in Hwaseung Enterprise, Dong-A ST, and POSCO this month due to reasons such as sluggish performance improvement and realization of investment gains from rapid stock price increases. Conversely, it increased its investment proportion in Hanse Industrial, which is expected to continue its strong performance trend in the second half of the year.

According to financial information provider FnGuide on the 17th, among the stocks in which the NPS holds more than 5% equity from the 1st to the 13th of this month, the stocks with decreased shares totaled three companies: Hwaseung Enterprise (10.07% → 9.85%), Dong-A ST (10.18% → 9.97%), and POSCO (10.01% → 9.95%), in that order.

Hwaseung Enterprise, primarily engaged in shoe manufacturing and sales, experienced a decline in profitability due to decreased order volumes and reduced factory operating rates caused by the spread of COVID-19 in Southeast Asia. In the second quarter of this year, Hwaseung Enterprise recorded sales of 304 billion KRW, a 1% decrease compared to the previous year, and an operating profit of 12 billion KRW, a 3% increase. Notably, the operating profit was 17% below market expectations. Park Hakyeong, a researcher at Korea Investment & Securities, stated, "Profitability was impaired due to decreased operating rates and yield deterioration caused by reduced order volumes." He added, "Production capacity in the second quarter decreased by 12% compared to the previous year, and the operating rate fell from 89% in the first quarter to 87% in the second quarter." Although order recovery is expected in the fourth quarter, the possibility of an extended shutdown of the Vietnam factory, which was halted until mid-month, remains a variable due to the COVID-19 situation in Southeast Asia.

Dong-A ST succeeded in turning a profit in the second quarter due to strong sales of ethical pharmaceuticals (ETC), but overall business unit growth slowdown led to results falling short of market expectations. Seo Geunhee, a researcher at Samsung Securities, explained, "ETC sales increased by 98.1% year-on-year to 91.7 billion KRW due to a regulatory advantage from the Ministry of Food and Drug Safety restrictions on competitors, but the overseas business unit and medical device & diagnostics sectors recorded weak performances, decreasing by 6.9% and 22.3% year-on-year to 35 billion KRW and 15 billion KRW, respectively." Samsung Securities lowered Dong-A ST’s target stock price from 110,000 KRW to 100,000 KRW.

The reduction in POSCO’s investment proportion is estimated to be partly for profit-taking, considering the Chinese steel export restriction policies and the bright performance outlook in the second half of the year amid global economic recovery, alongside a 25% surge in its stock price this year.

On the other hand, the NPS increased its holding proportion in Hanse Industrial from 10.00% at the end of last month to 10.12%. Hanse Industrial’s operating profit in the second quarter is expected to turn positive at 17 billion KRW, compared to a 1.5 billion KRW loss in the same period last year. Annually, operating profit is anticipated to rise 64.9% year-on-year to 107 billion KRW from 64.9 billion KRW last year.

This content was produced with the assistance of AI translation services.