[Click eStock] "Hyosung Chemical's Widening Deficit... Must Focus on High-Value Gas Growth"

[Asia Economy Reporter Lee Myunghwan] Hanwha Investment & Securities announced on the 2nd that it maintains a buy rating on Hyosung Chemical but lowers the target price from the previous 370,000 KRW to 230,000 KRW. This is due to the company's expanded losses in the second quarter of this year. However, it also advised paying attention to the growth of high value-added businesses such as gas.

Hyosung Chemical recorded an operating loss of 68.1 billion KRW in the second quarter of this year. Even considering a provision of 42.5 billion KRW, Hanwha Investment & Securities pointed out that the deficit widened. Polypropylene (PP) and dehydrogenation (DH) operations in Vietnam experienced troubles for three consecutive quarters since the fourth quarter of last year, leading to maintenance. Hanwha Investment & Securities expects that full operation will be difficult in the second half of the year as well. However, it noted that since the current polypropylene market is sluggish, the losses may not be significant.

Hanwha Investment & Securities forecasts that the polypropylene market will remain weak in the third and fourth quarters. This is due to oversupply, rising LPG raw material costs, and the overlapping sluggish PVC market, making improvement difficult.

However, Hanwha Investment & Securities emphasizes the strength of other business divisions. Operating profit in other sectors in the first half of this year was 48.3 billion KRW, a 42% increase compared to the same period last year. At the center of the improvement in other business division performance is Neochem. Hanwha Investment & Securities estimates Neochem’s operating profit to have doubled year-on-year to 30 billion KRW. Neochem produces 'NF3,' an etching gas used in semiconductors and displays, and recently, the yield improvement of the byproduct 'F2N2' has significantly increased margins, according to Hanwha Investment & Securities. Furthermore, with the expansion completed in September last year, next year’s performance is expected to rise further.

Jeon Wooje, a researcher at Hanwha Investment & Securities, diagnosed, "Although the market conditions will continue to be sluggish, troubles at the Vietnam plant will improve," and added, "Performance improvements are appearing in high-value other business divisions."

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