IBK Investment & Securities Report
On the 23rd, IBK Investment & Securities analyzed that Hyosung TNC's first-quarter earnings this year are expected to exceed market expectations based on increased demand for spandex. The investment opinion 'Buy' and the target price of 600,000 KRW were maintained.
Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "There is a need to raise the earnings outlook for Hyosung TNC's first quarter this year," adding, "Operating profit for the first quarter is expected to turn positive to 50.1 billion KRW compared to the previous quarter, significantly surpassing the market expectation of 14.7 billion KRW."
The core product, spandex, is expected to show clear performance improvement following the previous quarter. Due to the China reopening effect, demand in China increased, and the China plant, which completed expansion last year, began normal operation from March, showing positive effects in terms of volume and cost.
They also noted the effect of low-cost input of major raw materials such as butanediol (BDO) and methylenediphenyl diisocyanate (MDI). Additionally, improved operating rates of overseas subsidiaries in Turkey, Brazil, India, and Vietnam are factors contributing to performance improvement.
Operating profit from the trade and other sectors is expected to reach 20.5 billion KRW, a 25.9% increase compared to the previous quarter. The trade sector's selling price improved due to the removal of the off-season effect from the previous quarter, and sales volume in the Vietnam tire reinforcement materials sector increased compared to the previous quarter, while transportation costs decreased.
Second-quarter earnings are also expected to continue the trend of three consecutive quarters of profit growth due to expanded spandex inventory accumulation in preparation for the peak season of global fashion companies, full operation of the China spandex plant, commercialization of the expanded volume of the India subsidiary, and improvement in the spread of polytetramethylene glycol (PTMEG).
The researcher added, "The expansion of the Dong Nai PTMEG plant in Vietnam will be completed by June this year, which is expected to increase the self-sufficiency rate of raw materials and expand some external sales," and "BDO, the raw material for PTMEG, is expected to stabilize in price after the second half of this year due to expansion exceeding demand."
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