[Click eStock] Oil Price Rise → Offshore Plant Orders Improve... "Taekwang, Recommended as Second Best in Australia"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 8th that it recommends Taekwang, a KOSDAQ-listed company, as a secondary preferred stock due to improved marine plant order conditions from rising oil prices and enhanced earnings stability through the acquisition of a new subsidiary, with a buy investment opinion and a target price of 14,000 KRW.

Taekwang, established in 1982, is a fitting specialist company with over 40 years of experience in the industrial pipe fitting field called welding fittings. The subsidiaries include ‘Foundry Seoul,’ which operates a real estate rental business, and ‘HYTC,’ a manufacturer of secondary battery equipment and parts. It is evaluated that by owning subsidiaries with low relevance to the traditional fitting business, the company has increased the earnings stability of the highly cyclical industry and added growth potential.

Fittings are used in petrochemical, power generation, desalination plants, shipbuilding, and marine structures for transporting fluids and gases, requiring high-quality manufacturing processes and technical levels tailored to the characteristics of the transported materials. Margins vary depending on the fitting material, with stainless steel used in LNG projects having high margins and carbon steel used in refining and chemical plants having low margins.

Domestically, Taekwang and Sungkwang Bend share the market, while internationally, they compete with Italian companies (Bassi, Tectubi, Tecnoforge) and others. Taekwang has a higher export ratio centered on Europe and Asia compared to Sungkwang Bend, and its customer base is analyzed to be relatively diversified.

International oil prices, assuming increased crude oil demand due to recent economic recovery, are above $60. The feasibility of marine plant investments has increased, restoring order sentiment, with plant investments performing well in regions where Taekwang has strong sales capabilities, such as the Middle East and Asia.

The company acquired a 51% stake in HYTC in January this year, making it a subsidiary, a manufacturer of secondary battery equipment modules and ultra-precision parts, sustaining high growth along with an operating profit margin exceeding 10%.

It began to be reflected in the consolidated results for the first quarter of this year, and Taekwang’s annual consolidated performance is expected to turn profitable with sales of 200.1 billion KRW (+6.2%) and operating profit of 8.9 billion KRW. Researcher Lee Taehwan of Daishin Securities said, "The company has a structure that easily passes cost burdens onto prices, and the separate performance is expected to improve in the second half as Middle East investment sentiment improves with a low start and high finish trend," adding, "The subsidiary Foundry Seoul will also generate real estate rental income from this year, and HYTC is expected to continue growth compared to the previous year, which will further enhance the earnings stability of the consolidated results."