[Click eStock] "TKG Huchems, Gradual Market Recovery... Target Price Down"

Target Price Lowered from 24,000 KRW to 23,000 KRW

On the 7th, KB Securities downgraded the target price of TKG Huchems from 24,000 KRW to 23,000 KRW, anticipating a gradual recovery in market conditions. The investment rating was maintained as 'Buy.'

Jeon Woo-je, a researcher at KB Securities, explained, "The target price downgrade is due to a slight downward revision of the return on equity (ROE) for 2025-2026, caused by a decrease in mining demand leading to a slowdown in nitric acid and nitrobenzene sales. Ammonia prices fell by 2% in the first quarter compared to the previous quarter, despite rising gas prices, due to weakened demand and increased supply from the Middle East."

TKG Huchems recorded an operating profit of 8.2 billion KRW in the fourth quarter of last year, falling 35% short of the consensus (average securities firm forecast). Jeon said, "Dinitrotoluene (DNT) and mononitrobenzene (MNB) recorded 1.2 billion KRW, and nitric acid and nitrobenzene 6.9 billion KRW. DNT’s profitability declined as the utilization rate dropped to 63% in Q4 due to deteriorating market conditions for toluene diisocyanate (TDI) downstream. Additionally, year-end one-off costs and the off-season delayed performance improvement."

KB Securities estimates TKG Huchems’ operating profit for the first quarter of this year to be 14.3 billion KRW, a 75% increase from the previous quarter. Jeon commented, "This is due to the base effect of one-off and off-season factors in Q4. Although a slight decrease in MNB earnings is expected due to regular maintenance, the recent improvement in the TDI spread is positive."

Jeon projected the annual operating profit for this year to increase by 4% year-on-year to 84.1 billion KRW. He explained, "From the second quarter, the effect of capacity expansion will be fully reflected, but this assumes a slowdown in demand for nitric acid and nitrobenzene and a downward stabilization of ammonia prices. In the long term, MNB’s market conditions are positive, and although DNT’s downstream market remains weak, a rebound in the TDI spread was observed in Q1, suggesting a gradual recovery within the year."