[Edaily Reporter PARK MIN ] On the 4th, Shinhan Investment Securities lowered its target price for HYOSUNG ADVANCED MATERIALS(298050)from 300,000 won to 260,000 won, noting that despite strong performance in its core business, the stock price has fallen sharply due to concerns over sluggish growth in certain business segments, placing its valuation at a historic low.
However, the firm maintained its “Buy (BUY)” investment rating, noting that as the reduction in carbon fiber losses gains momentum, the company is expected to return to profitability in the first half of next year, and the value of its growth businesses will gradually come to the fore.
Lee Jin-myung, a senior analyst at Shinhan Investment Securities, stated in a report released today, “We expect the polyester (PET) tire cord business to maintain robust profitability in the second half of the year, backed by its position as the global market leader and strong pricing power,” adding, “Stable earnings momentum will be sustained through limited capacity expansion and increased sales of hybrid cords.”
He continued, “While the value of growth businesses is expected to gradually come to the fore alongside a return to profitability in the first half of next year,” he added, “we are lowering the target price to 260,000 won (-13%) to reflect the downward revision of global peer multiples.”
The analyst predicted that the carbon fiber business would begin to “narrow its losses” in earnest due to the expansion of new customer bases and the easing of fixed-cost burdens following the restart of facilities in Jeonju and Vietnam.
According to the report, HS HYOSUNG ADVANCED MATERIALS’ operating profit for the second quarter of this year rose 126% year-over-year to 77.6 billion won, exceeding the consensus estimate (market average forecast of 63.9 billion won).
Of this total, operating profit from tire reinforcing materials was 64.8 billion won, an 82% increase compared to the same period last year.
Tire cord selling prices rose 17% from the previous quarter, and the operating profit margin increased by 4.4 percentage points to 11.8%, driven by an improved product mix and high capacity utilization rates.
Additionally, the operating loss for superfibers (carbon fiber and aramid) narrowed to -13 billion won, while carbon fiber saw simultaneous improvements in both sales volume (+43%) and selling prices (+8%).
Senior Researcher Lee emphasized, “With the differentiated profitability of tire cord confirmed, carbon fiber has also entered a recovery phase,” adding, “As a return to profitability next year is becoming more visible, a reassessment of the core business and growth sectors is necessary.”