[Featured Stock] Kolon Plastics Soars 20% on Forecast of Record 2Q Earnings

[Asia Economy Reporter Ji Yeon-jin] Kolon Plastics surged, hitting a new 52-week high again as forecasts emerged for record-breaking performance in the second quarter.

As of 10:20 AM on the day, Kolon Plastics was trading at 7,860 KRW, up 15.61% from the previous day. During the session, the stock soared to 8,410 KRW, setting a new 52-week high.

Earlier, Kiwoom Securities maintained a buy rating on Kolon Plastics, projecting the company to record its highest-ever operating profit in the second quarter of this year, and raised the target price to 9,400 KRW. Researcher Lee Dong-wook of Kiwoom Securities stated, "Kolon Plastics is expected to achieve an operating profit of 10.1 billion KRW in the second quarter, marking a significant turnaround from a loss in the same period last year and setting a record high. The sales for the second quarter are expected to exceed 100 billion KRW for the first time, reaching 108.7 billion KRW." This improvement is attributed to a strong base effect following the COVID-19 outbreak last year and an improved business environment in automotive, electrical, and household goods sectors.

The company’s main product, polyoxymethylene (POM), is seeing increased sales volume due to a 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 due to the replacement cycle of electrical and electronic products. Furthermore, the company has been able to smoothly pass on the sharp increases in raw material and logistics costs to product prices amid the improving market conditions, and the Shanghai subsidiary is also expected to see performance improvements due to favorable market conditions in China.

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

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