[Click eStock] "Kolon Industries, Profitability Recovery is Key... Target Price Down"

Target Price Revised Downward by 8.1% Compared to Previous Estimate

Daishin Securities lowered the target price for Kolon Industries from 57,000 KRW to 52,000 KRW on the 29th, viewing profitability recovery as the key. The investment rating was maintained at 'Buy.'

Researcher Wi Jeong-won of Daishin Securities explained, "While the operating profit estimate for the industrial materials division in 2024 remains valid due to the recovery in tire cord demand and aramid capacity expansion, we lowered the profit estimates for the chemical and film business divisions, resulting in an 8.1% reduction in the target price compared to the previous level."

Kolon Industries' Q4 performance last year fell short of market expectations. Researcher Wi said, "The Q4 operating profit was 40.9 billion KRW, 22% below market expectations. The industrial materials division saw limited overall profit improvement due to profit declines from aramid price drops, the chemical division experienced continued price declines amid weak demand for petroleum resin along with one-time costs from scheduled maintenance, and the film business division's deficit widened compared to the previous quarter due to inventory valuation losses caused by year-end customer operation rate adjustments."

This year, profitability is expected to show gradual recovery. Researcher Wi stated, "Kolon Industries' expected operating profit for this year is 198 billion KRW, a 25.6% increase from the previous year, driven by improved tire cord demand from replacement (RE) tire demand recovery, gradual reflection of aramid capacity expansion effects after Q1, and the impact of high value-added petroleum resin capacity expansion in the second half."

The establishment of a joint venture (JV) for the film business with Han & Company is seen as a strategy to strengthen competitiveness. Earlier, Kolon Industries announced on the 27th in response to an inquiry disclosure that it is reviewing operations through a JV establishment with Han & Company for the film business division. Researcher Wi commented, "The announcement of a JV with SK Microworks (the film business division acquired by Han & Company from SKC in 2022) as a measure to resolve deficits in the film business division is judged to be a strategy to strengthen market competitiveness by expanding the scale of the film business division, similar to Han & Company's past acquisitions and mergers of domestic cement companies."