[Click eStock] "Kolon Industries, H2 Stock Price Rise Valid... Target Price Lowered by 5%"

Shinhan Financial Investment Report

[Asia Economy Reporter Minji Lee] Shinhan Financial Investment maintained a buy rating on Kolon Industries on the 12th and set a target price of 95,000 KRW, down 5% from the previous target. This reflects the weak stock trends of major global competitors, but the company is expected to show an upward trend in the second half of the year.

In the first quarter, the company recorded an operating profit of 56.3 billion KRW, estimated to be in line with the market expectation of 58.6 billion KRW. This represents a 1,969% increase compared to the previous quarter. Operating profit from industrial materials is estimated to have increased by 7% quarter-on-quarter to 37.8 billion KRW, driven by strong performance in tire cords and aramid. Jinmyung Lee, a researcher at Shinhan Financial Investment, said, “The subsidiary Kolon Plastics is expected to achieve record-high performance, but Glotech is likely to show a sluggish trend due to disruptions in new car production.”

Sales and operating profit in the fashion sector are expected to improve significantly compared to the same period last year. Strong sales from new brand launches and golf brands are expected to continue, leading to favorable results. However, the chemical, film, and electronic materials sectors are expected to show weak performance due to rising costs and high freight charges.

Industrial materials are expected to sustain structural growth through major business expansions this year and next year. The Vietnam tire cord plant (19,200 tons) is scheduled to be completed in September this year and will begin commercial operations immediately, with high cost competitiveness expected to result in high profitability. The aramid expansion (15,000 tons) is expected to be completed by September next year, which is predicted to increase annual operating profit by 50 to 60 billion KRW.

This year, sales and operating profit in the fashion sector are expected to reach 1.16 trillion KRW and 55.3 billion KRW, respectively, representing increases of 14% and 44% compared to the same period last year. The effects of structural changes sustained over several years are expected to continue this year, leading to strong performance. Differentiated profit growth is anticipated through new golf-related brand launches and the WACC physical spin-off.

Researcher Jinmyung Lee analyzed, “Although the company’s stock price has continued to weaken since the beginning of the year, the favorable market conditions for major businesses such as tire cords, aramid, and fashion are ongoing. With the momentum of industrial materials expansion set to accelerate in the second half and improvements in other business units’ performance, the fundamentals will be further strengthened and the stock price is expected to trend upward.”