[Click eStock] Baeksan, Tesla's Interest and Strong Performance

[Asia Economy Reporter Lee Seon-ae] Hana Securities announced on the 28th that it maintains a Buy rating and a target price of 21,300 KRW for Baeksan.

The reasons for maintaining the target price are ▲ the increasing usage of synthetic leather by electric vehicle manufacturers including Tesla ▲ steady orders for automotive synthetic leather due to the expansion of applicable vehicle models for client companies ▲ expected sales growth in 2023 due to capacity expansion in Indonesia. Hana Securities analyst Kim Doo-hyun stated, "Considering Baeksan's active development of eco-friendly materials such as vegan leather that replace natural leather and the effects of the capacity expansion in Indonesia, there are no discount factors," adding, "The current stock price level corresponds to a price-to-earnings ratio (PER) of 6 times, which is considered an aggressive buying zone."

A key factor behind Baeksan's strong performance is the increase in sales of automotive synthetic leather. Automotive synthetic leather sales are expected to grow from 49 billion KRW in 2021 to 72 billion KRW in 2022 and 120 billion KRW in 2023. The growth driver is the increasing orders for electric vehicles. For electric vehicles, weight reduction is important, so there is a greater demand for synthetic leather compared to heavy natural leather, and the manufacturing cost is 30-40% cheaper, positively impacting cost reduction efforts by electric vehicle manufacturers. Additionally, trends in animal protection and ESG management in the US and Europe are reducing the use of natural leather, so growth in synthetic leather is expected to continue.

Recently, Hyundai Motor Group announced plans to launch new vehicles using vegan leather next year and to build a mass production plant in Bangladesh starting next year. Baeksan is expanding its lineup of synthetic leather including vegan leather, so related benefits are expected.

Meanwhile, Baeksan's consolidated second-quarter results are expected to show sales of 105 billion KRW (a 16.4% increase year-on-year) and operating profit of 10.1 billion KRW (a 36.5% increase). Baeksan's consolidated results for 2022 are projected to be sales of 465.3 billion KRW (a 25.4% increase) and operating profit of 47.2 billion KRW (a 103.4% increase).

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