[Click eStock] "Kolon Industries, Entering 100 Billion KRW Operating Profit Era After 10 Years"

Smooth Sailing Across All Business Divisions... Surprise 2Q Performance Expected This Year
Rising Expectations for Hydrogen Materials Sector... Projected Sales of 1 Trillion KRW by 2030

[Asia Economy Reporter Minwoo Lee] Kolon Industries is expected to surpass 100 billion KRW in quarterly operating profit for the first time in 10 years as the performance of all business divisions improves in the second quarter of this year.

On the 25th, Kiwoom Securities forecast that Kolon Industries will record sales of 1.157 trillion KRW and an operating profit of 100.2 billion KRW in the second quarter of this year. This represents a surprising performance with sales increasing by 22.8% and operating profit by 170.3% compared to the same period last year. It is the first time since the second quarter of 2011 that Kolon Industries has exceeded 100 billion KRW in quarterly operating profit. Researcher Dongwook Lee of Kiwoom Securities explained, "While the peak season effect of industrial materials and fashion occurs, an improvement in the performance of all business divisions including chemicals, film, and electronic materials is expected."

The expansion of production facilities in the aramid division announced by Kolon Industries the day before is also an important positive factor. Kolon Industries stated that it will invest a total of 236.9 billion KRW to expand production capacity from the existing 7,500 tons to 15,000 tons by the third quarter of 2023. This investment is interpreted as a response to the increasing demand for aramid due to the expansion of the 5G optical cable and electric vehicle markets. Through this, Kolon Industries’ aramid sales are expected to surge from about 180 billion KRW last year to 363 billion KRW this year.

Researcher Lee said, "Additionally, further profitability improvement is expected due to fixed cost reduction from economies of scale and increased sales of special products," adding, "Considering the depreciation ratio and multiples of competitors, the operating value of Kolon Industries’ aramid business after expansion will conservatively reach 1.3 trillion KRW."

The hydrogen materials sector is also progressing smoothly. It is evaluated to have already secured global competitiveness in areas such as moisture control devices, polymer electrolyte membranes (PEM), and membrane electrode assemblies (MEA). The moisture control device has completed the national core technology preliminary review and has been actively increasing exports since last year. It was also selected for the next-generation third-generation Hyundai Motor fuel cell system. Supply to Europe and North America is also expected.

PEM is preparing to enter both the fluorine-based and hydrocarbon-based markets simultaneously. Demand is expected to continuously increase due to the expansion of various mobility and water electrolysis markets. MEA has already entered the domestic building market. In the commercial vehicle sector, certification procedures are underway with overseas clients. Researcher Lee analyzed, "Kolon Industries’ hydrogen materials sales will increase from about 30 billion KRW this year to 120 billion KRW in 2023 and 1 trillion KRW by 2030."

Against this backdrop, Kiwoom Securities maintained a 'Buy' rating on Kolon Industries and raised the target price by 15% to 115,000 KRW. The closing price the previous day was 72,200 KRW.