[Click eStock] "TKG Huchems, Excessive Undervaluation... Performance Improvement Expected This Year"

Maintaining 'Buy' Investment Rating

On the 18th, IBK Investment & Securities analyzed that TKG Huchems is excessively undervalued in terms of market capitalization. The investment opinion was maintained as 'Buy,' but the target price was lowered from 28,500 KRW to 25,000 KRW.

Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "TKG Huchems' recent stock price has been declining due to the operation of domestic nitric acid competitors' expanded capacity this year, a slowdown in the toluene diisocyanate (TDI) market leading to a decrease in the operating rate of dinitrotoluene (DNT), and the overall undervaluation of the chemical sector." However, he judged that "the recent decline in market capitalization is excessive."

Regarding this analysis, the researcher explained, "The company holds cash and marketable assets worth around 400 billion KRW, exceeding 60% of its market capitalization, and the effects of facility investments exceeding 200 billion KRW, such as the expansion of high-purity nitric acid and mononitrobenzene (MNB) from 2022 to 2023, will be reflected starting this year." In particular, for MNB, whose production capacity has increased by more than 70%, the factory is expected to operate at a high rate this year due to improved demand for LNG insulation materials driven by the domestic shipbuilding industry's recovery. The above-average dividend payout ratio of TKG Huchems was also seen as a reason for the undervaluation of its corporate value (valuation).

Performance this year is expected to gradually improve starting from the first quarter. The researcher explained, "Regular maintenance of isocyanate plants at major clients such as Hanwha Solutions, OCI, and BASF Korea will be conducted in the first quarter of this year."