[Click eStock] KB Securities Presents Kolon Industries as Top Pick Among Small and Mid-Cap Chemical Stocks

[Asia Economy Reporter Ji Yeon-jin] KB Investment & Securities announced on the 7th that it has designated Kolon Industries as the top pick among small and mid-sized chemical stocks and raised the target price to 108,000 KRW.

Kolon Industries is expected to record sales and operating profit of 1.1304 trillion KRW and 81.7 billion KRW in the third quarter, respectively, representing increases of 18.1% and 184.8% compared to the same period last year. This exceeds market expectations. The high profitability of industrial materials is expected to continue, along with improvements in the chemical and fashion business performance.

In the third quarter, sales and operating profit from industrial materials are expected to be 503.6 billion KRW and 48.8 billion KRW, respectively, similar to the second quarter. The selling price of PET tire cords is estimated to have increased by about 10% compared to the previous quarter. In July, the export price was 4,217 USD per ton, up 7.4% from the previous month. However, due to delays in new car launches caused by a shortage of automotive semiconductors, sales volumes of airbags and car seats are estimated to have slightly decreased compared to the previous quarter.

The operating profit of the chemical business in the third quarter is expected to be 24.6 billion KRW (OPM 11.0%), a 5.1% increase compared to the second quarter.

Baek Young-chan, a researcher at KB Securities, said, "Profit growth is expected through the expansion of tire cords and aramid, and certification and commercial production of key hydrogen fuel cell materials such as PEM (polymer electrolyte membrane) and MEA (membrane electrode assembly) are anticipated." He added, "Kolon Industries plans to expand PET tire cords by 19,200 tons in Vietnam by September 2022. Considering low labor and electricity costs and synergies with existing factories, profitability exceeding 10% is fully achievable."

Furthermore, in the fourth quarter of 2023, an additional 7,500 tons of aramid will be expanded, securing a total production capacity of 15,000 tons. As demand expands for 5G cables and electric vehicle tire cords, the high profitability of aramid is expected to continue until 2025. Researcher Baek stated that corporate value is expected to rise through active expansion and commercialization of hydrogen fuel cell materials.

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