[Click eStock] "Hansol Chemical, Mid-to-Long-Term Growth Remains Valid... Target Price Down 25%"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Hansol Chemical on the 15th, while lowering the target price by 25% from the previous level to 300,000 KRW.

The company's Q4 sales reached 207.6 billion KRW, a 6% increase compared to the previous quarter. Operating profit was 35.6 billion KRW, down 36%. While sales met the company's estimates, operating profit fell short. Subin Lee, a researcher at Daishin Securities, said, “The NB latex division recorded poor performance as selling prices continued to decline following Q3,” adding, “This was due to the suspension of operations at nitrile glove factories in Southeast Asia, the largest demand market for NB latex, amid the worsening COVID-19 situation.”

Additionally, the rise in natural gas prices contributed to increased costs of the company’s main product, hydrogen peroxide, worsening profitability. One-time expenses, including performance bonuses, were recognized, causing results to fall below the company's estimates.

This year, sales and operating profit are estimated to grow 15% year-on-year to 808.5 billion KRW and 226.5 billion KRW, respectively. The outlook has been revised downward, reflecting the decline in selling prices and rise in raw material costs in NB latex through the first half of the year. Researcher Lee said, “From the second half of this year, sales of semiconductor materials to major customers are expected to expand,” adding, “The diversification of the portfolio and the increased proportion of high value-added material sales are also positive factors for profitability improvement.”

She further explained, “The target price reduction is due to the downward revision of this year’s earnings forecast and the decline in valuation multiples of global semiconductor material companies.”

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