[Click eStock] "Hyosung Chemical, Multiple Overlapping Adverse Factors... Target Price Down 37%"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating on Hyosung Chemical on the 1st but lowered the target price by about 37% to 440,000 KRW, reflecting a downward revision of next year's target price estimate.

In the third quarter, Hyosung Chemical recorded an operating profit of 32.9 billion KRW, down 54% from the previous quarter. This was about 48% below the market consensus estimate of 63.3 billion KRW. It is analyzed that this was due to one-time costs at the headquarters, a surge in propane prices, and an expansion of losses in the Vietnam business. However, excluding the one-time fire repair cost of 7 billion KRW in the headquarters' PP and DH divisions, it is predicted that solid performance was recorded.

Researcher Jaesung Yoon of Hana Financial Investment said, "The losses of the Vietnam subsidiary reflected the impact of shutdowns of major front-end companies such as Lock&Lock, a key customer, due to COVID-19 lockdowns," adding, "This led to a deterioration in price mix and margin decline." Additionally, the TPA division reduced its deficit, and NF3's operating profit further improved due to expanded F2N2 production capacity, recording an operating margin in the 18% range.

Operating profit for the fourth quarter is estimated to decline by 10% from the third quarter to 29.4 billion KRW. This is because the strong propane prices have generally increased cost burdens. The Vietnam DH facility, which was completed in July and has been operating since September, is expected to incur costs as it undergoes re-inspection for about 25 business days starting this month. Considering the easing of COVID-19 in Vietnam, the increased operating rates of front-end customers, and the average rise in PVC, a competing material to high value-added PP, the performance of PP and DH is expected to be solid.

Researcher Yoon said, "From August, adverse factors overlapped all at once," adding, "It is unfortunate that PP price volatility is severe due to China's coal regulations and power shortages, but since performance will normalize after the Vietnam DH inspection and restart, it is unlikely to worsen further than now."

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