[Click eStock] Kolon Plastic, Strong Performance Expected Amid POM Strength

[Asia Economy Reporter Junho Hwang] Shinhan Financial Investment maintained the target price of Kolon Plastics at 16,000 KRW, anticipating profit improvement due to increased new car production in the second half of this year.

Shinhan Financial Investment expects Kolon Plastics to achieve an operating profit of 11.6 billion KRW in the second quarter of this year, marking the highest quarterly performance. Despite weakness in the compound division caused by sluggish demand in the automotive sector, the polyacetal (POM) division is expected to drive earnings growth. Despite strong raw material (methanol) prices, POM spreads rose 6% quarter-on-quarter due to price increases amid tight supply and demand. The POM industry is a high-entry-barrier oligopoly market, with Kolon Plastics holding the third-largest global market share.

Shinhan Financial Investment expects a solid profit trend to continue in the second half of this year due to the strength of POM, forecasting Kolon Plastics' operating profit to reach 46.4 billion KRW this year, achieving a record high performance.

Jinmyung Lee, Senior Researcher at Shinhan Financial Investment, stated, "Although the stock price has fallen 29% from its peak due to macroeconomic concerns and industry uncertainties despite solid earnings power, considering the recovery of compound profits from increased new car production in the second half of this year, a revaluation of earnings and an upward trend in the stock price are expected."