[Click eStock] "Kolon Industries, Profitability Expected to Rise... Target Price Up to 51,000 KRW"

Kiwoom Securities raised the target price for Kolon Industries to 51,000 KRW on the 24th, citing an expected upward trend in profitability this year. The investment rating was maintained at 'Buy.'

Jeong Kyung-hee, a researcher at Kiwoom Securities, stated in a report on the same day, "As a global leader in polyester tire cords, Kolon Industries is expected to benefit from the recovery in the tire cord market," adding, "The reduction in profit and loss impact due to structural changes in loss-making segments and increased aramid production are also positive factors."

There are three main reasons supporting the forecast of an upward trend in operating profit this year. First, structural changes are expected in the film electronic materials division, which recorded an operating loss of approximately 86 billion KRW last year. Researcher Jeong said, "We are considering establishing a joint venture (JV) in the first half of the year," and added, "Due to the reduction in equity holdings, the impact of the weak market conditions on profit and loss is expected to decrease significantly, as it will be accounted for under equity-method earnings rather than consolidated operating profit."

Furthermore, Jeong noted, "As demand from the tire industry, the upstream sector, shows signs of recovery, the profitability of the main product, polyester tire cords, is likely to improve," and pointed out, "The operating rate of the expanded aramid production capacity (CAPA) is expected to increase alongside profitability improvements."

Accordingly, the first-quarter performance is estimated at approximately 1.2 trillion KRW in sales and about 40 billion KRW in operating profit. Researcher Jeong explained, "The operating environment improved due to the depletion of upstream inventory in the main product, tire cords, and profitability improved in the chemical division due to an increase in petroleum resin prices."