[Click eStock] "Hwasung Inder Stock Price Approaches 50% Discount Rate"

On the 6th, DS Investment & Securities stated, "The earnings have entered a full-fledged upward cycle," and analyzed that "a reassessment of Hwasung Ind.'s individual performance is necessary."

The corporate structure of Hwasung affiliates is in the form of 'Hwasung Ind. → Hwasung Enterprise → Hwasung Vina and other manufacturing affiliates.' Hwasung Enterprise is a listed subsidiary established by contributing 100% of the shares of Hwasung Vina (Vietnam), previously held by Hwasung Ind., as an in-kind contribution. In the consolidated financial statements, most of the sales of Hwasung Ind. and Hwasung Enterprise overlap. However, brand royalties and some fees paid by Hwasung Enterprise are added to Hwasung Ind.'s sales.

The performance of both companies showed an exceptional growth trend in the fourth quarter, thanks to the revival of their client, Adidas.

Based on separate financial statements, Hwasung Ind.'s sales consist of supplying raw materials to Hwasung Enterprise, receiving products (such as sneakers) manufactured by Hwasung Enterprise and delivering them to Adidas, and royalties (1.4~1.7%), among others.

Analyst Kim Suhyun pointed out, "Hwasung Ind.'s consolidated performance includes the listed Hwasung Enterprise," and added, "To evaluate the fair value of Hwasung Ind., it is appropriate to calculate it based on individual net profit."

DS Investment & Securities estimated Hwasung Ind.'s individual net profit last year to be approximately 25 to 30 billion KRW, with a fair value of at least 514.7 billion KRW. Compared to the previous day's market capitalization of 283.8 billion KRW, this implies a discount rate approaching 50%.

Analyst Kim emphasized, "If Hwasung Enterprise and Hwasung Ind. were still one company as before, the corporate value should currently be at least 1.1 trillion KRW," and added, "As of the previous day, the combined market capitalization is 870 billion KRW, indicating that a reassessment of Hwasung Ind.'s individual performance is necessary."