[Click eStock] "Kolon Industries, Historic Highs Change After 10 Years"

[Asia Economy Reporter Ji Yeon-jin] KB Securities announced on the 4th that it maintains a buy rating on Kolon Industries, reflecting increased profits in industrial materials and improved profitability in the fashion sector, and raised the target price by 6.5% to 115,000 KRW.

The company recorded sales and operating profit of 1.1286 trillion KRW and 77.3 billion KRW in the third quarter of this year, up 17.9% and 169.3%, respectively. The operating profit exceeded market expectations (72 billion KRW). The third-quarter operating profit from industrial materials was 45.6 billion KRW, down 6.2% from the previous quarter due to decreased new car sales caused by a shortage of automotive semiconductors, but it is analyzed that the high profitability of key industrial material products such as airbags and aramid continues.

Next year, sales and operating profit are expected to reach 4.7711 trillion KRW (+3.6%) and 379 billion KRW (+15.6%), respectively. This is due to the expansion of industrial materials profits through the expansion of tire cord production in Vietnam and the improvement in profitability of films and electronic materials following the resolution of logistics issues. The profitability of PET tire cords is also expected to remain strong next year. Annual demand growth is estimated at 32,000 tons, while next year's expansion is limited to 19,000 tons.

Kolon Industries shows expectations that its historic peak will change for the first time in 10 years this year. The peak price of Kolon Industries was 129,000 KRW in July 2011. Baek Young-chan, a researcher at KB Securities, said, "In 2011, half of the operating profit was contributed by fashion, but now it is covered by industrial materials," adding, "The production capacity and competitiveness of PET tire cords have been strengthened, and new expansion of aramid is scheduled for 2023. Following investment in moisture control devices, commercial production of MEA (Membrane Electrode Assembly) and PEM (Polymer Electrolyte Membrane) is also expected to begin in earnest from next year."