[Click e-Stock] "Kolon Industries Expected to Increase Earnings for First Time in 4 Years... Target Price Maintained"

On December 9, Yuanta Securities stated its continued "Buy" rating and 70,000 won target price for Kolon Industries, forecasting that next year’s operating results will break above the 150 billion won range for the first time in four years. With the previous day’s closing price at 43,000 won, this implies a 63% upside potential.

On this day, Hwang Kyuwon, a researcher at Yuanta Securities, said, "Next year’s projected results are sales of 5.2 trillion won, operating profit of 201.1 billion won (operating margin of 3.9%), and net profit attributable to controlling shareholders of 160.5 billion won." This operating profit represents a 35% increase compared to this year’s estimate of 148.5 billion won. By business segment, the expected operating profits are 113.6 billion won for chemicals, 99 billion won for industrial materials, and 10.8 billion won for fashion.

Hwang identified three key positive factors driving the improved outlook: ▲petroleum resin ▲aramid ▲m-PPO (modified polyphenylene oxide).

First, the global market for petroleum resin, an industrial adhesive material, is expected to improve. Due to the closure of ExxonMobil’s European plant (95,000 tons) at the beginning of the year, global supply will decrease by 3% out of a total demand of 3 million tons.

Second, aramid for telecommunication cables is expected to turn profitable after being in the red. The facility utilization rate, which was expanded to 15,000 tons in the second half of last year, is planned to reach full operation at the beginning of next year. This could enable a turnaround from an annual deficit of 30 billion won to a surplus.

Third, the 2,000-ton m-PPO facility will be completed in May. Kolon Life Science will polymerize PPO, which Kolon Industries will then blend with insulation materials and sell to copper-clad laminate manufacturers. The company is expected to benefit from the growth of high-power semiconductor chips, with anticipated annual sales of 150 billion won and operating profit of 30 billion won.

Additionally, Hwang noted, "With the absorption merger of Kolon ENP, approximately 2.43 million new shares will be issued, increasing the total number of outstanding shares by 8.8%. The dilution effect has already been reflected in the target price," adding, "However, it is notable that EBITDA (earnings before interest, taxes, depreciation, and amortization) after interest and tax payments will reach 300 billion won, which is higher than the 100 billion won in capital expenditures, resulting in accumulated free cash flow."

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