[This Week's Hot Stock] Spandex Price Rebound Signals... Why Hyosung TNC Is Smiling

Operating Rates and Inventory Indicators Improve Amid Chinese Price Hikes
Earnings Expectations Raised... Greater Potential for Revaluation

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As spandex prices rebound, the Yeouido financial district is turning its attention to Hyosung TNC. The textile and chemical sectors have struggled for a long time to find a rebound momentum, as both demand slowdown and supply pressures persisted. Recently, however, positive indicators such as price increases, higher operating rates, and reduced inventory days have emerged simultaneously, raising expectations for a market recovery. This is why Hyosung TNC, the global leader in spandex market share, is drawing attention.

Hyosung TNC is a spandex manufacturer holding about a 30% market share, maintaining its position as the global number one. Its business segments are divided into textiles and chemicals, which produce spandex, PTA, and nylon yarn, as well as trading and others, which handle steel products and more.

Shin Hongju, a researcher at Shin Young Securities, explained, "Between 2020 and 2025, spandex supply in China increased by an average of 13% per year, while demand grew by only 8%. As the market slump continued, smaller companies exited the market, and the pricing power of top-tier companies has strengthened."

Choi Younggwang, a researcher at NH Investment & Securities, also analyzed, "Recently, there have been discussions about the potential bankruptcy of a company that holds about a 16% market share in China. As the downcycle has persisted for more than four years, marginal companies are starting to emerge."

Price Hikes from China: "The Signal We've Been Waiting For"

Industry structural changes are being reflected in prices first. According to Shinhan Investment & Securities, Chinese spandex companies raised their selling prices by 1,000 yuan per ton in January this year. Lee Jinmyung, a researcher at Shinhan Investment & Securities, predicted, "Since entering a downcycle after the boom in 2021, Chinese prices have remained at historic lows. With restructuring accelerating and only limited capacity additions this year, market conditions are expected to improve."

The price increase is less of a one-off event and more a result of changes in supply-demand dynamics. Yoon Jaeseong, a researcher at Hana Securities, analyzed, "Last year, spandex demand in China reached 1.05 million tons, up 9% from the previous year. Since the second half of last year, there has been a clear increase in downstream demand, and inventory days have shortened from about 55 days at the beginning of last year to the high 30s now."

He added, "The operating rate for Chinese spandex rose from the high 70% range at the start of last year to 85% now, which is further evidence of demand recovery."

After the Chinese New Year, it is highly likely that fabric manufacturers' operating rates will recover, and their raw material inventory days remain relatively short. If orders resume in this situation with low inventory pressure, spandex demand could gradually recover.

On the supply side, the burden is clearly easing. NH Investment & Securities analyzed that, due to a prolonged downcycle, small and mid-sized companies in the Chinese spandex market are either reducing their facilities or exiting the market. The number of small and mid-sized companies in China has dropped significantly compared to ten years ago. The market is being reorganized around top-tier companies. Annual spandex production in China is 1.5 million tons, and the top five companies, including Hyosung TNC, account for 80% of the market share. As the pace of capacity expansion among major players has slowed while demand growth outpaces it, supply pressures are gradually easing. According to NH Investment & Securities, spandex demand is expected to increase by about 80,000 to 110,000 tons this year. In contrast, new capacity additions are expected to reach a maximum of 30,000 tons, a sharp decrease from last year's 170,000 tons.

The significance of the price hike lies in the cost structure of the spandex industry. Due to the high proportion of fixed costs in this materials sector, operating leverage becomes significant as utilization rates rise. When selling prices recover above a certain level, profit improvement outpaces sales growth. The key variable in this process is the spread, or the difference between selling prices and raw material costs.

Hyosung TNC's competitiveness stands out even more. As the global leader in market share, if market conditions recover, the company is likely to secure both higher sales volume and prices. As supply tightens, customers tend to concentrate orders with top-tier companies capable of stable supply.

This is why expectations for a corporate value re-rating are growing. Lee Jinmyung, a researcher at Shinhan Investment & Securities, explained, "From this year, we expect a revaluation of the spandex business due to improved supply-demand balance. Considering that the value of 10,000 tons of spandex for Huafeng, the global number two, is 165.7 billion won, Hyosung TNC's target market capitalization is 2.5 trillion won." Even on a simple comparison basis, there is room for Hyosung TNC's business value to be re-rated.

Shin Young Securities estimated that Hyosung TNC will achieve an operating profit of 330.5 billion won this year, up 27% from last year's estimate. Researcher Shin Hongju stated, "Currently, Hyosung TNC outperforms Chinese competitors in both profitability and market share, but the stock price does not reflect this. If selling prices rise significantly after March this year or if the bankruptcy of the third-largest company becomes visible, we may revise our earnings estimates upward."

However, cost variables need to be monitored. The price trend of butanediol (BDO), a key raw material for spandex, must also be considered. Even if selling prices continue to rise, if raw material prices surge, the pace of margin improvement could be limited. Ultimately, the quality of the market rebound depends on whether both sustained price increases and cost stability are achieved.