[Click eStock] "Dongseong Hwa In Tech, Performance Growth Expected Through Expansion"

SK Securities analyzed on the 25th that Dongsung Hwa Intec is expected to see performance growth due to capacity expansion last year. They maintained the investment opinion as 'Buy' and the target price at 17,000 KRW.

SK Securities forecasted that Dongsung Hwa Intec's sales and operating profit for the fourth quarter of last year would reach 140.2 billion KRW and 13.1 billion KRW, respectively. Sales increased by 9.1% compared to the same period last year, and operating profit turned positive.

Seunghan Han, a researcher at SK Securities, explained, "Regarding operating profit, it is estimated to have exceeded consensus due to the stabilization of key raw material prices and exchange rate increases, the expansion of the proportion of semi-finished products with relatively high margins, and the increased share of high-margin Ho-seon sales."

He added, "As for sales, it is estimated to have fallen short of consensus due to a delay of about 2 to 4 weeks in the delivery volume of insulation materials caused by the tight construction schedule of domestic shipyards."

SK Securities emphasized that Dongsung Hwa Intec's performance growth is expected with the secured production capacity of liquefied natural gas carriers (LNGC). Researcher Han said, "As of the third quarter of last year, Dongsung Hwa Intec secured production capacity for insulation materials for 20 to 25 LNGCs. With this additional expansion, it is expected to increase to 30 vessels annually by the third quarter of this year, enabling sales growth of more than 10% compared to last year."

He stated, "As of the third quarter of last year, there was already an order backlog worth approximately 2.3 trillion KRW, so despite the recent capacity expansion, delivery is tight with production only for domestic shipyards," and added, "It is understood that there are no orders from Chinese shipyards adopting the Mark-III type, so it is appropriate to exclude sales expansion from this."

He emphasized, "From the second half of this year, along with topline growth due to securing capacity for 30 vessels, the delivery of high-priced orders from the second half of 2022 and last year will bring about a significant profit improvement effect. Also, together with MDI, from the second half of this year, sales and profits are expected to increase due to the stabilization of wood prices."