[Click eStock] "KCC Glass 3Q Outlook Weak Due to Poor Automotive Sales"

Decline in Automotive Glass Sales Due to Disruptions in Vehicle Production

[Asia Economy Reporter Minwoo Lee] KCC Glass's third-quarter performance this year is expected to be somewhat sluggish. This is due to a decline in automotive safety glass sales and a slowdown in the growth of Prestressed High-strength Concrete (PHC) pile sales.

On the 14th, Korea Investment & Securities lowered KCC Glass's target price by 9.8% to 83,000 KRW, citing these reasons. The closing price the previous day was 65,900 KRW. The investment rating 'Buy' was maintained.

Korea Investment & Securities forecasted that KCC Glass would record separate sales of 279.5 billion KRW and operating profit of 36.6 billion KRW in the third quarter of this year. These figures represent decreases of 8.6% and 25.6%, respectively, compared to the same period last year. Sales and operating profit estimates were revised downward by 3.5% and 21.5%, respectively, from previous projections.

Researcher Kyungtae Kang of Korea Investment & Securities explained, "Although the production capacity of flat glass at the Yeoju plant normalized after maintenance of the melting furnace, the shortage of automotive semiconductors led to a decrease in third-quarter shipments by automakers and a decline in summer operating rates, resulting in a 20% reduction in tempered glass production at the Jeonui plant compared to previous estimates. Due to the nature of automakers ordering only the necessary quantities without inventory accumulation, safety glass production has closely followed automaker shipment volumes, which is the key factor behind the third-quarter performance downturn."

The third-quarter sales of the pile business division are also expected to be weak, as the growth in PHC pile sales is anticipated to slow. Researcher Kang analyzed, "The PHC pile producer price index in August was 111.51 points, down 1.5% from the end of the second quarter. More important than the decline is the halt in the price increase trend, likely due to the resolution of supply-demand pressures caused by pile price collusion fines and seasonal factors."

However, demand from automakers is expected to gradually recover. This outlook is based on improvements in the COVID-19 situation in Malaysia, which is expected to ease the procurement issues of automotive semiconductors. Researcher Kang stated, "It is time to focus on KCC Glass's core investment points such as the increase in glass demand at automakers and construction sites entering mid-term processes, tight PHC pile supply, and the share swap issue among major shareholders of the group company for affiliate separation, rather than temporary setbacks."