[Click eStock] "Hyosung Advanced Materials to Continue Earnings Growth Next Year"

Raw Material Prices Rise but Market Supply Shortage Persists
Favorable Environment Expected for Increasing Demand of New Car Tires

[Asia Economy Reporter Minwoo Lee] Despite the expected decline in spandex profits due to rising raw material prices in China, Hyosung Advanced Materials is anticipated to maintain stable growth next year as the growth of polyester (PET) tire cords, a key industrial material, continues.

On the 7th, Kiwoom Securities maintained a 'Buy' rating on Hyosung Advanced Materials and raised the target price by 5.3% to 1,000,000 KRW. The closing price the previous day was 666,000 KRW.

Kiwoom Securities forecasted that Hyosung Advanced Materials' operating profit will increase by 13.3% to 526.7 billion KRW next year compared to this year's estimate. Although it will not be a four-digit growth compared to the previous year as this year, the profit growth trend is expected to continue. Despite the anticipated profit decline in Vietnamese spandex due to the rise in China's polytetramethylene ether glycol (PTMEG) prices, the supply increase of PET tire cords remains limited, and with growing demand for original equipment (OE) tires, the supply shortage of PET is expected to persist.

Additionally, the effect of increased aramid volume from the expansion in the second half of this year is expected to be fully reflected. Steel cords, which have a larger production capacity than PET tire cords, are also maintaining strong prices. Approximately 50% of sales come from long-term supply contracts with major tire companies, providing a stable sales base.

Researcher Dongwook Lee of Kiwoom Securities stated, "Although annual facility investment costs of around 1.5 trillion KRW will occur due to expansions such as carbon fiber, the net debt ratio, which exceeded 400% in 2019, is expected to decrease to 113.5% next year due to the sale of the Unyang factory site and buildings, favorable product supply and demand conditions, and exchange rate environment." He added, "Considering Hyosung Advanced Materials' strategy to maintain market share of its core products and its ownership of idle land in Vietnam, delayed tire cord expansions and domestic facility rationalizations postponed by COVID-19 may also materialize."