[Click eStock] "Kolon Industries, Front Industry Slump Next Year... Target Price Down"

Kiwoom Securities on the 20th downgraded the target price of Kolon Industries (Kolon Industries) to 50,000 KRW, stating that "some challenges are expected in related upstream industries next year." The investment opinion was presented as Outperform (a buy-like opinion).

On the same day, Kiwoom Securities researchers Jeong Kyung-hee and Shin Dae-hyun said, "Kolon Industries recorded sales of 1.18 trillion KRW in the third quarter of this year, down 6% from the same period last year due to a slowdown in demand in upstream industries caused by the economic recession. Operating profit for the same period decreased by 56.9% to 22.1 billion KRW. The performance significantly missed both company and market expectations." Operating profit for next year is expected to show solid growth of 27.7% compared to this year, reaching 203.5 billion KRW.

Researcher Jeong said, "Even if the upstream industries closer to the final consumers are somewhat sluggish, profitability will improve through the company's own response strategies and expansion of high value-added product lines." However, he added, "Due to the prolonged weakness in global replacement (R/E) tire demand, weakness in tire cords, which are tire reinforcements in the industrial materials sector, is expected to continue in the first half of the year," noting that "the main demand for tire cords comes from R/E tires, and the demand for R/E is weak."

Film and electronic materials saw a slight recovery in the upstream industries of electronics and displays. Researcher Jeong explained, "Film demand is sluggish compared to the past. However, due to line restructuring and optimization of operating rates, operating losses are expected to further decrease next year." Despite the slowdown in growth of outdoor and golf wear in the fashion sector, efficiency policies through inventory management are preparing for the upstream slowdown.

Researcher Jeong said, "Kolon Industries has a diversified business portfolio including industrial materials, chemical resins, fashion, electronic materials, and others. However, fashion is slowing down in outdoor and golf, and electronic materials continue to incur losses, so the diversification advantage is not significant in the short term." He added, "The expansion of high value-added product lines such as aramid and petroleum resin (PMR) is positive, but the impact will gradually contribute from next year onward."