[Click eStock] "Dong-A Hwasung, Attractive Effects of Eco-Friendly Green Items and Overseas Subsidiary Diversification"

[Asia Economy Reporter Eunmo Koo] KB Securities evaluated that Dong-A Hwasung's eco-friendly green items such as electric vehicles, hydrogen vehicles, hydrogen fuel cell businesses, and the diversification effect of overseas subsidiaries are attractive.

Dong-A Hwasung is a manufacturer of special rubber parts for automobiles, home appliances, and industrial use. Its main products include automobile air intake hoses, intercooler pipes, and door gaskets that absorb vibration and provide cushioning for drum washing machines. Major customers include Hyundai, Kia, Nissan, Honda, LG Electronics, Samsung Electronics, Haier, and Panasonic.

Dong-A Hwasung's sales in the third quarter of this year increased by 3.8% compared to the same period last year, reaching 76.5 billion KRW; operating profit rose by 205.3% to 6.2 billion KRW; and net profit increased by 123.9% to 3.3 billion KRW. On the 12th, KB Securities researcher Sang-guk Lim stated in a report, "The recovery of operating rates at major overseas subsidiaries such as China due to the resumption of economic activities, and an efficient product mix in automobiles and home appliances are considered the main factors behind the surprise performance," adding, "We expect profit normalization to accelerate further." Additionally, net profit turned sharply positive from a loss of -1.8 billion KRW in the first half due to the stabilization of emerging market currencies.

The evaluation highlights the attractiveness of eco-friendly green items such as electric vehicles, hydrogen vehicles, hydrogen fuel cell businesses, and the diversification effect of overseas subsidiaries. Researcher Lim analyzed, "Battery pack gaskets for electric vehicles are currently supplied to Hyundai, US GM, and China's First Automobile Works, with plans to expand production capacity in the future," and added, "The portfolio of eco-friendly rubber products, including intake and exhaust hoses for hydrogen vehicles and integrated gaskets for hydrogen fuel cell stack bipolar plates, is excellent."

Attention should also be paid to the growth potential of the subsidiary Dong-A Fuel Cell (82.5% stake). Researcher Lim explained, "Dong-A Fuel Cell is developing a 5kW-class high-temperature polymer electrolyte membrane fuel cell (HT-PEMFC) system," and noted, "KC and KS certifications are expected within the year, which means commercialization is imminent." Furthermore, he said, "Currently, there are nine overseas production subsidiaries, and the operating rates of major overseas subsidiaries in China, India, Vietnam, and Russia are rapidly normalizing," adding, "The full-scale mass production of battery injection parts for North American automobiles in the fourth quarter will also act as a positive momentum for performance."