[Click eStock] "Hyosung TNC, Target Price Maintained at 440,000 Won"

Spandex Upstream Supplier Inventory Hits Historic Low

NH Investment & Securities maintained a target price of 440,000 KRW and a buy rating for Hyosung TNC on the 25th.

NH Investment & Securities analyzed that the inventory of spandex downstream companies has reached a historic low. With the spandex operating rate rising to 87%, the accumulated oversupply has been resolved. While the potential for further raw material price declines is limited, gradual inventory replenishment demand is expected to emerge, leading to an improvement in the spread.

The operating rate of spandex in China increased from 76% at the beginning of the year to 87% currently, resolving the oversupply phase. Despite the rise in operating rate, the inventory days slightly decreased from 43.3 days at the beginning of the year to 39.4 days, indicating a solid supply-demand balance.

The operating rates of fabric manufacturers, which are the downstream of spandex, are gradually increasing, with the inventory days of finished fabric products at only 20 days, a historic low. Raw material inventory days are also low at 11 days. The second quarter is the period when orders are placed for the current winter FW season products, and the third quarter is for the next year's spring and summer SS season products. In fact, as the inventory days of fabric manufacturers are low, discussions regarding spandex orders are gradually increasing.

Currently, the raw material BDO price is at 1,290 USD per ton, positioned within the production cost range (1,200?1,500 USD per ton), so there is limited room for further price declines. However, due to the gradually increasing spandex demand from the second quarter, the spread is expected to improve.

Choi Young-kwang, a researcher at NH Investment & Securities, forecasted, "Sales will reach 1.8 trillion KRW and operating profit will be 47.1 billion KRW in the first quarter of this year."