[Click eStock] "Kolon Plastics, Highest Ever Operating Profit in 2Q"... Target Price Up

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities announced on the 18th that it expects Kolon Plastics to record the highest-ever operating profit in the second quarter of this year, maintaining a buy rating and raising the target price to 9,400 KRW.

Lee Dong-wook, a researcher at Kiwoom Securities, stated, "Kolon Plastics is expected to achieve an operating profit of 10.1 billion KRW in the second quarter of this year, marking a significant turnaround from the same period last year and setting a record high," adding, "The sales revenue for the second quarter is expected to exceed 108.7 billion KRW, surpassing 100 billion KRW in a single quarter for the first time." This improvement is anticipated due to a significant base effect from last year's COVID-19 outbreak and the recovery in the automotive, electrical, and household goods industries.

The company’s main product, polyoxymethylene (POM), is seeing increased sales volume due to the rebound in the automotive industry in China, Europe, and the United States. Additionally, overall plant utilization rates have improved, and fixed cost reductions have been achieved through joint ventures and production synergies. Demand for engineering plastics is also improving as the replacement cycle for electrical and electronic products arrives. Furthermore, the company has been able to smoothly pass on the sharp increases in raw material and logistics costs to product prices due to the improved market conditions, and the Shanghai subsidiary is expected to see performance improvements thanks to the favorable market environment in China.

Kolon Plastics is expanding the proportion of related products to respond to the increasing demand for eco-friendly automotive parts and lightweight materials for electric vehicles and hydrogen vehicles. In the electric vehicle sector, polyoxymethylene is applied to fuel systems in hybrid electric vehicles (PHEV/HEV), and to motor gears in electric vehicles (BEV) for electrical and electronic components. Polyamide (PA) is used for batteries and electronic components, while polybutylene terephthalate (PBT) is used for high-voltage parts in electric vehicles.

In particular, in the hydrogen vehicle sector, the company is developing materials for hydrogen tanks through a consortium with domestic OEM automakers and carbon fiber material companies. Kolon Plastics is responsible for developing the internal EP (liner) for hydrogen tanks, with commercialization targeted for 2023.