[Click eStock] "Kolon Industries, Surge in Demand for Key Products... Turnaround Expected"

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities announced on the 1st that it has raised the target stock price of Kolon Industries from the previous 87,000 KRW to 90,000 KRW, expecting improved performance due to the recent surge in prices of the company's main product, tire cords (fiber material tire reinforcements that enhance tire durability), driven by increased demand for electric vehicle tires.

Lee Dong-wook, a researcher at Kiwoom Securities, said on the day, "The nylon tire cords mixed with aramid, the main product of the company's industrial materials division, are currently in a situation where they cannot be sold due to lack of supply," adding, "This is due to increased demand from downstream companies, and the tire cord market has entry barriers as product certification by customers takes 2 to 5 years due to safety issues." Because of the characteristic that new companies find it difficult to increase production capacity in a short period even if tire cord demand rises sharply, a price increase for Kolon Industries' products is inevitable.

Kolon Industries' operating profit for the first quarter of this year is expected to be 58.4 billion KRW, a 120.2% increase compared to the same period last year, significantly exceeding the recently sharply raised market expectation of 50.8 billion KRW. The deficit in the fashion division is expected to decrease significantly, and a turnaround in the industrial materials division's performance is anticipated due to improvements in the automotive/tire industry upstream.

The operating profit of the industrial materials division is expected to increase by 163.4% year-on-year to 40 billion KRW. Last year, due to the base effect of poor performance caused by COVID-19 and the improvement in demand for upstream automotive/tires, the operating rates of tire cords, POM, airbags, and automotive seats rapidly increased. Additionally, with the expansion of the 5G and electric vehicle markets, aramid is maintaining solid profitability.

The operating profit of the chemical division is expected to decrease by 14.5% year-on-year to 17.2 billion KRW. This is attributed to intensified competition in petroleum resins due to increased operating rates of domestic competitors despite price increases in phenolic resins and polyurethane.

The operating profit of the film and electronic materials division is expected to increase by 57.7% year-on-year to 8.5 billion KRW. This is due to increased sales of PET films for polarizers and DFR driven by the favorable LCD market, steady demand for packaging PET/nylon films, expanded demand for PET films for MLCC due to tight MLCC supply, and increased sales of transparent PI films.

The operating profit of the fashion division is expected to reduce its deficit significantly to -5.3 billion KRW compared to the same period last year.