[Click eStock] "Hyosung TNC Turns Profitable on China Reopening Effect... Target Price Up"

Shinhan Investment Corp. maintained a 'Buy' rating on Hyosung TNC on the 16th and raised the target price to 550,000 KRW.

Hyosung TNC's stock price surged 83% from last year's low (September 30) due to expectations of China's reopening, but recently entered a correction phase. This appears to be due to profit-taking selling triggered by concerns over elevated valuation amid limited earnings improvement and conservative target prices presented after China's Two Sessions.

The operating rate of Chinese spandex, which was only around 60% at the beginning of the year, rose to 85% in March due to inventory accumulation demand from downstream companies. Nevertheless, the inventory days of Chinese spandex decreased from about 35 days at the beginning of the year to 29 days. In March, Chinese spandex prices increased by 12% compared to January, showing signs of industry recovery.

Accordingly, operating profit for the first quarter of this year is expected to turn positive at 31.2 billion KRW. The spandex spread in the first quarter rose 17% quarter-on-quarter, sustained by a positive lagging effect from the use of low-cost raw materials. During the industry downturn in the second half of last year, a negative lagging effect was maximized, resulting in losses; however, during the upturn, cost increases were passed on to selling prices, leading to spread improvement. Going forward, the spread increase is expected to gradually expand, enabling quarterly profit growth trends.

Lee Jin-myung, a researcher at Shinhan Investment Corp., said, "China's retail sales growth rate for January and February was 3.5%, showing a significant improvement compared to -1.8% in December last year, revealing the reopening effect." He added, "As downstream demand recovery continues, gradual spread increases are expected, and with additional market share expansion due to new factory operations in China, the reopening momentum is expected to continue."

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