[Click eStock] "Hyosung TNC, Target Price Lowered to 365,000 Won"

On the 19th, SK Securities lowered the target price of Hyosung TNC to 365,000 KRW.

The spandex market conditions are expected to improve in 2025. This is because the effect of strong demand from the United States, along with the strengthening of China's economic stimulus measures, is expected to materialize fully in 2025. In October 2024, U.S. apparel imports increased by 20.1% year-on-year due to factors such as the inventory adjustment base in 2023. Although uncertainties such as tariff impositions remain, steady demand is expected to continue next year based on economic recovery, and considering Hyosung TNC's competitiveness outside China, it is anticipated to benefit from this.

Meanwhile, in China, positive indicator changes are occurring, such as an improvement in the consumer confidence index in October and a reduction in the decline of real estate prices in November. The strengthened economic stimulus policy in China during the first half of this year is expected to take full effect next year, leading to a recovery in demand.

Along with gradual demand improvement, limited expansion of spandex production capacity is expected to continue next year, creating a favorable supply-demand environment. The nominal operating rate is forecasted to improve to 81.8% in 2025. Although some spandex price declines have occurred due to the seasonal off-season this year, price recovery is expected with the arrival of the peak season in 2025.

The price of butanediol (BDO) continues to show a slowdown in its decline as of December 2024, and further decreases are expected to be limited. With the improved supply-demand environment, an increase in the average selling price of spandex and an improvement in the spread are expected during the peak season, contributing to earnings improvement.

Fourth-quarter sales are expected to be 1.9 trillion KRW (+7.2% YoY, -2.2% QoQ), and operating profit 58 billion KRW (+100.1% YoY, -14.2% QoQ), reflecting a seasonal decline in earnings. However, since earnings in 2025 are expected to improve compared to 2024, fundamental improvements are expected to continue.

Do-hyun Kim, a researcher at SK Securities, stated, "Although the multiple is at a historical low due to risks related to the acquisition of the special gases division, the medium- to long-term upside from the acquisition is expected to be highlighted, and as the core business improvement is expected to continue, the current stock price level is attractive."