[Click eStock] KCC, Market Capitalization Completely Unreflective of Silicon's Operating Value

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 4th that it maintains a buy rating on KCC and raises the target price to 600,000 KRW. This is due to the higher-than-expected contribution of silicone to earnings and the reflection of the value of investment securities. It was judged that the operating value of silicone was virtually not reflected at all.

Yoon Jae-sung, a researcher at Hana Financial Investment, explained, "The market value of Samsung C&T and Korea Shipbuilding & Offshore Engineering shares held by KCC exceeds 2.4 trillion KRW based on market price, but the current market capitalization of KCC at 2.8 trillion KRW does not reflect any upward revision of operating value from the Momentive acquisition (3.5 trillion KRW acquisition price). On the other hand, 2022 is expected to show record-high performance based on the mix shift to high value-added silicone products and strong performance in building materials and coatings."

Considering that this is a period where the narrative of structurally tight supply and demand for silicone and the expansion of front markets such as EV and electronics is likely to be reflected, the current stock price is judged to be absolutely undervalued.

Silicone is widely applied in battery materials and EV parts/body, and its usage amount (4 times compared to internal combustion engine vehicles) is continuously increasing. Silicone possesses all the characteristics required for EV transition, making it a material that can realize and accelerate the spread of EV transition.

Silicone is used for coating, sealing, and coupling of vehicle bodies, as well as for spot and adhesive bonding between vehicle components. It is also applied to EV motors and powertrains to perform heat dissipation, electromagnetic shielding, and weight reduction. Additionally, it is applied to next-generation anode materials. Since KCC also operates a coatings business, it is judged to have excellent competitiveness in the silicone hard coat product group. Silicone hard coat is a material that enables weight reduction of EVs equipped with heavy batteries. The application of hard coat allows the adoption of lightweight engineering plastics instead of steel plates in the vehicle body.

Meanwhile, operating profit for Q4 2021 is expected to be 143.9 billion KRW (QoQ +20%, YoY +184%), exceeding consensus by 13%. Operating profit for 2022 is estimated at 611.2 billion KRW (YoY +33%), marking a record high, thanks to the high profit-generating power of silicone.

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