[Click eStock] Hyosung Benefits from Subsidiaries... 1Q 'Surprise Earnings'

Equity-Method Subsidiaries T&C, Cheomdan Sosae, and Hwakhak Surprise with Strong Earnings
Consolidated Subsidiaries like T&S Show Consecutive Weakness
Rebound Expected from 2Q... Hyosung's Overall Strong Performance Anticipated to Continue

[Asia Economy Reporter Minwoo Lee] Thanks to the 'surprise earnings' of equity-method subsidiaries, Hyosung also posted strong results in the first quarter. This positive trend is expected to continue into the second quarter.

On the 3rd, Daishin Securities maintained a 'Buy' rating on Hyosung and raised the target price by 8.3% to 130,000 KRW. The previous trading day's closing price was 99,400 KRW. The explanation is that the increase in net asset value (NAV) was reflected as the subsidiaries' strong performance drove the stock price up.

In the first quarter, Hyosung recorded consolidated sales of 686.9 billion KRW and operating profit of 100.6 billion KRW. Compared to the same period last year, sales increased by 1.5%, and operating profit surged by 707.6%. Net income attributable to controlling shareholders also turned positive, recording 71.7 billion KRW compared to the previous year.

The strong performance of equity-method subsidiaries was the biggest factor. Hyosung TNC, Hyosung Advanced Materials, and Hyosung Chemical all posted triple-digit growth rates in operating profit in the first quarter, exceeding market expectations. Hyosung TNC achieved an operating profit of 246.8 billion KRW, up 214.4% year-on-year. Hyosung Advanced Materials recorded an operating profit of 83.4 billion KRW, a 192.6% increase compared to the same period last year. Hyosung Chemical's operating profit also rose 392.8% to 61.1 billion KRW during the same period. Accordingly, equity-method income from these subsidiaries was recognized as 28.5 billion KRW from Hyosung TNC, 9.0 billion KRW from Hyosung Advanced Materials, and 8.5 billion KRW from Hyosung Chemical.

However, the consolidated subsidiary Hyosung TNS showed weak performance in the first quarter. Sales were 155.5 billion KRW and operating profit was 3.6 billion KRW, down 28.0% and 82.9% respectively from the same period last year. Yang Jihwan, a researcher at Daishin Securities, explained, "Although the first quarter is traditionally an off-season, the decline was also due to delayed orders from customers caused by the resurgence of COVID-19." Additionally, the combined results of FMK, Hyosung Goodsprings, and Hyosung Transworld showed sales of 356.4 billion KRW and operating profit of 3.9 billion KRW, down 15.4% and 51.3% respectively year-on-year.

The favorable earnings trend is expected to continue into the second quarter. Researcher Yang said, "Hyosung TNS is expected to recover its performance in the second quarter due to sales recognition from supplying store-type robot kiosks and unmanned checkout counters, as well as delayed customer orders." He added, "With equity-method subsidiaries expected to maintain strong performance in the second quarter, Hyosung's strong results are likely to continue."