[Click eStock] "Expansion after expansion... Hyosung Chemical's performance continues to rise"

Q3 This Year Marks the Low Point... Upward Trend Possible Until 2023
Continued Expansion in Vietnam and New Facility Investments Domestically

[Asia Economy Reporter Minwoo Lee] As new facility investments continue, including the domestic expansion of nitrogen trifluoride (NF3), Hyosung Chemical is expected to maintain an upward performance trend from the third quarter of this year through 2023.

On the 16th, KTB Investment & Securities maintained its 'Buy' rating and target price of 510,000 KRW for Hyosung Chemical based on this outlook. The closing price on the previous day was 401,500 KRW.

Operating profit on a consolidated basis for the third quarter of this year is expected to be 57.8 billion KRW, falling short of the market consensus of 70.4 billion KRW. This is because the operating profit of the core business division, polypropylene (PP)/dehydrogenation (DH), which accounted for 76.7% of the operating profit contribution in the second quarter, is expected to decrease by 31.4% quarter-on-quarter to 37.5 billion KRW in the third quarter.

Researcher Ilseon Park of KTB Investment & Securities explained, "In the domestic sector, it is inevitable to reflect the impact of spread contraction due to rising propane prices and the early execution of scheduled maintenance originally planned for the first quarter of next year, following the DH-1 fire accident in Ulsan last day." He added, "In Vietnam, due to the spread of the COVID-19 Delta variant, purchasing demand from downstream customers has been sluggish, resulting in operating profits at the break-even point (BEP) level."

However, this period is expected to be the bottom, with performance projected to improve through 2023. From next year, the effect of the Vietnam expansion will begin to be fully reflected, and new facility investments such as NF3 are also continuing.

First, the operating profit of PP/DH in Vietnam at the end of next year is expected to reach 106 billion KRW, an increase of 97 billion KRW compared to this year. Once the DH plant is fully operational, propane procurement will become smoother, allowing the company to escape from a deficit structure. Due to this performance rebound, the overall operating profit contribution on a consolidated basis is estimated to rise to 29.2%.

Additionally, Hyosung Chemical announced on the 8th that it will invest approximately 120 billion KRW to expand NF3 production by 2,000 tons at the Oksan plant. Completion is expected by September next year, with mass production starting in the fourth quarter of next year. Upon completion of the expansion, Hyosung Chemical's production capacity will increase to 6,800 tons, and including Hyosung TNC's production capacity in China, the group's total production capacity is expected to rise to 9,800 tons. This level approaches 73% of the production capacity of domestic competitors. On the 13th, the company also announced an investment of 20 billion KRW to establish a dedicated plant for PP prototype production at the Yongyeon plant.

Researcher Park said, "The facility is scheduled to be completed in March 2023 to accelerate the commercialization timing of products under development for entry into the new premium market." He analyzed, "In addition to the large-scale expansion in Vietnam, efforts to discover new demand sources are ongoing, highlighting the visibility of mid- to long-term growth drivers."

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