[Market Focus] HS Hyosung Surges Over 20% on Dividend Expectations

HS Hyosung showed strong performance in early trading on the 29th. The buying sentiment appears to have revived due to an increase in distributable profits and expectations for improved performance from its subsidiaries.

As of 9:18 a.m. on this day, HS Hyosung shares were trading at 50,100 won on the Korea Exchange, up 23.40% from the previous trading day. The stock opened at 44,000 won and continued to widen its gains.

HS Hyosung's retained earnings surged from 19 billion won at the end of last year to 319 billion won in the first quarter of this year. This was due to a reduction of approximately 300 billion won in capital reserves. Lee Dongwook, a researcher at IBK Investment & Securities, stated on this day, "The increased retained earnings are likely to be used as a source for future dividends."

He added, "If the entire 300 billion won is distributed as a capital reduction dividend, it could impact the financial structure. However, the standalone debt ratio would rise from 12.2% to 27.0%, which remains at a manageable level." He further pointed out, "In theory, the dividend yield could reach up to about 200%." He emphasized, "Capital reduction dividends are subject to tax exemption, which is expected to increase shareholders' effective dividend income and have an additional positive impact on the stock price."

Improved performance from major subsidiaries such as HS Hyosung Advanced Materials and HS Hyosung Information Systems is also expected to positively affect the stock price. Lee noted, "HS Hyosung Advanced Materials has seen a rebound in performance since the second half of last year, driven by improved results in its main tire reinforcement materials business due to seasonal demand in the second and third quarters of this year, increased sales of carbon fiber, and reduced logistics costs from lower maritime freight rates." He added, "If the sale of the steel cord business materializes, it is expected that financial stability and growth potential will be further enhanced through a reduction in the debt ratio and the strengthening of new high value-added businesses."

Regarding HS Hyosung Information Systems, he stated, "Based on its more than 1,700 client companies, it has maintained the No. 1 position in the IDC-certified high-end storage market for 11 consecutive years and is expected to show strong growth through the expansion of its AI infrastructure business."