Which Stocks Did the National Pension Service Specifically Pick in December?

Among stocks with over 5% stake,
only 'Hyosung Chemical' additionally included

Expectations for performance improvement next year
Judged as a good opportunity to buy at a low price
Net purchase of 3,328 common shares

[Asia Economy Reporter Ji-hwan Park] The National Pension Service, a major player in the capital market, has added shares of Hyosung Chemical to its portfolio in December. The decision is attributed to expectations of a clear improvement in performance starting next year, despite the poor results in the second half of this year.

According to financial information provider FnGuide on the 13th, the National Pension Service was the only investor to increase its stake in Hyosung Chemical among stocks with more than 5% ownership this month. On the 7th, the National Pension Service purchased an additional 3,328 common shares (0.11%) of Hyosung Chemical, raising its total holdings to 317,906 shares (9.97%). Hyosung Chemical is a leading specialty chemical company producing and selling general-purpose and premium polypropylene (PP) derived from propane, terephthalic acid (TPA) used in chemical fibers, and nitrogen trifluoride (NF3), a special gas used in semiconductor and display etching processes. It is especially the market leader in special PP for construction pipes.

The financial investment industry views that although Hyosung Chemical experienced poor performance until the second half of this year, concerns about a peak-out in earnings have eased, and its undervaluation appeal has become more prominent, leading to net buying by the National Pension Service. In the third quarter, Hyosung Chemical posted sales of 630.6 billion KRW and an operating profit of 32.9 billion KRW, marking an earnings shock that fell 48% short of market expectations (63.3 billion KRW). Factors contributing to the poor performance include rising costs, a 7 billion KRW expense due to a fire at the Ulsan plant, and expanded losses at the Vietnam subsidiary amid the resurgence of COVID-19 in Southeast Asia.

In the fourth quarter, sales are expected to increase by more than 100 billion KRW from the third quarter to 740 billion KRW, but operating profit is forecasted at 30.3 billion KRW, less than half of the 61 billion KRW in the first quarter and 71 billion KRW in the second quarter. This is due to intensified cost burdens as the price of Saudi propane, a key raw material, rose 29% compared to the third quarter amid strong international oil prices.

However, analysis suggests a full-scale improvement in performance will begin next year. Sales are projected to reach 3.1743 trillion KRW, marking the first-ever annual sales exceeding 3 trillion KRW, and operating profit is expected to approach 297.6 billion KRW, nearly 300 billion KRW. These figures represent increases of 23% and 52%, respectively, compared to this year's annual forecast. Jin-myung Lee, a researcher at Shinhan Financial Investment, stated, "Concerns about costs for Hyosung Chemical are expected to gradually ease with the decline in Saudi LPG prices in December and increased propane production in the U.S. From a mid- to long-term perspective, the fourth quarter appears to be the bottom of Hyosung Chemical’s performance, making it a good time to buy."

Although Hyosung Chemical’s stock price surged 29.7% in a short period from 246,000 KRW to 319,000 KRW this month as of the 10th, it is still considered undervalued. It remains 24.6% below the short-term peak of 423,000 KRW recorded on September 17 over the past three months, indicating ample room for stock price growth relative to performance, according to the securities industry. The current average target price for Hyosung Chemical in the securities sector is about 443,000 KRW, suggesting a potential upside of 38.9% from the current price.

Kyung Choi, a researcher at Heungkuk Securities, emphasized, "With the completion of a 1.4 trillion KRW expansion of the Vietnam PP and dehydrogenation (DH) plants in the second quarter of this year, related sales are expected to be reflected starting next year. Due to steady demand from the semiconductor and display front-end industries, NF3 production capacity is also planned to expand from the current 4,800 tons to 6,800 tons by the third quarter of next year. Therefore, both the performance and profitability of Hyosung Chemical are expected to grow significantly next year."

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