[Click eStock] "Nexen Tire Expects Operating Loss This Year... Due to Butadiene Price Increase"

[Asia Economy Reporter Hwang Yoon-joo] KB Securities analyzed on the 31st that Nexen Tire is expected to incur losses due to the rise in butadiene prices. Accordingly, the investment opinion was maintained as 'Hold,' but the target price was lowered by 8.6% to 6,400 KRW.

KB Securities researcher Kang Sung-jin stated, "Nexen Tire's operating loss in 2022 is expected to reach 105.6 billion KRW." This figure falls short of the market consensus (22.2 billion KRW loss) by 83.4 billion KRW and KB Securities' previous forecast (62.2 billion KRW profit) by 167.8 billion KRW.

Researcher Kang explained the basis for the 'Hold' investment opinion by saying, "Due to the recent rise in butadiene prices, the 2022 operating profit is expected to fall below the market consensus."

He also analyzed, "If the semiconductor situation improves in the future, tire sales are expected to recover; however, if the proportion of OE (Original Equipment) tires, which have relatively weak pricing power, expands, the effect on profit improvement will be limited."

Researcher Kang stated, "The 2022 annual average forecast for the prices of the main raw materials, natural rubber and synthetic rubber, has been raised by 13.8% and 42.7%, respectively, to 2 million KRW and 2.4 million KRW per ton."

The significant increase in the forecast for synthetic rubber prices is due to the rise in butadiene prices, the raw material for synthetic rubber, from 800 USD/ton at the end of 2021 to early 2022 to 1,024 USD/ton in the first quarter. As of May, it has risen to 1,420 USD/ton.