[Click eStock] "Kolon Industries, Current Stock Price Excessively Undervalued Compared to Competitors"

[Asia Economy Reporter Park Jihwan] Kiwoom Securities evaluated that Kolon Industries is excessively undervalued in terms of stock price compared to Chinese competitors recording similar profits in its core aramid business. They issued a 'Buy' investment opinion with a target price of 87,000 KRW.

Researcher Lee Dongwook of Kiwoom Securities analyzed, "Kolon Industries' operating profit in the fourth quarter of last year was 60.4 billion KRW, a 436.2% increase compared to the same period last year," adding, "Despite an unfavorable exchange rate effect for export stocks, the improvement in the tire and automobile industry led to better operating rates of tire cord, airbags, and other automotive parts and materials plants." He also noted that sales in the fashion sector recovered due to the drop in winter temperatures, resulting in a large turnaround to profit compared to the previous quarter, and that the solid performance of the aramid business, which has strong margins due to the expansion of the 5G and electric vehicle markets, contributed to this.

In particular, it is expected that from this year onward, the expansion of the highly profitable aramid business and over 15 years of hydrogen-related research and development will be reflected in the fundamentals.

The hydrogen-related materials business is divided into membrane humidifiers, PEM, and MEA. The membrane humidifier is supplied to Hyundai Motor Company and holds a globally high market share.

PEM has completed preparations for business operations within the first half of this year. MEA is pursuing mass production investment based on its own PEM development. Accordingly, hydrogen material sales are expected to increase to the 100 billion KRW level next year.

Researcher Lee Dongwook predicted, "The effect of membrane humidifier expansion and the technological capability to supply both PEM and MEA, key components for hydrogen vehicles, will be fully reflected in the fundamentals starting this year."

He said, "The market capitalization of Chinese competitor Yantai Tayho, which records similar profits in the aramid business, is about 2.6 trillion KRW," adding, "Considering the value of other business divisions, the current stock price is judged to be excessively undervalued."