Hyosung Corp., the holding company of South Korea’s textile and chemical conglomerate Hyosung Group, is expected to see its stock price rebound in the second half on the back of strong performance of its key subsidiaries.

According to the Korea Exchange on Tuesday, shares of Hyosung fell 1.94 percent this year as of Monday. The decline comes despite a surge in the stock prices of its key subsidiaries.

Hyosung TNC Corp. gained 8.57 percent, Hyosung Advanced Materials Corp. 32.83 percent, and Hyosung Chemical Corp. 1.01 percent.

Analysts cite two reasons behind the decline in Hyosung‘s stock price. The first is reduced dividend payouts.

In February, Hyosung announced that it will pay 4,500 won ($3.42) per share to shareholders based on its profit last year, down from 5,500 won in the previous year. Market insiders assumed the company’s dividend payout will remain relatively low for the time being.

“The dividend is likely to remain at about 4,500 won per share until 2025, relatively lower than the average payouts in the past, due to deteriorating financial soundness at the group’s key subsidiaries, such as Hyosung TNS and Hyosung Chemical,” said Yang Il-woo, a researcher at Samsung Securities Co.

The poor market performance of Hyosung TNS Inc. is cited as another reason behind the sluggish price of Hyosung stock.

Hyosung holds a 54 percent stake in the maker of automated teller machines and the company has been seeing a decline in returns since 2020 as it is affected by the war in Ukraine.

Analysts, however, predict that Hyosung’s stock price will soon rebound on the back of stock price surges of its listed affiliates in anticipation of improved earnings.



According to local financial data tracker FnGuide, Hyosung TNC’s operating profit is estimated at 434.5 billion won for this year, more than tripling from the 132.6 billion won in the previous year. Its operating profit next year is projected to reach 619 billion won.

Given Hyosung TNC’s leading position in the global spandex market, the company is likely to enjoy a hike in demand following China’s economic recovery.

“The company enjoyed an earnings surprise in the first quarter as demand for its products rapidly recovered after China reopened, with improvements being observed across many indicators, including operation rates, inventory days and spreads,“ said Lee Jin-myung, a researcher at Shinhan Securities Co.

The researcher added that a significant improvement in the company’s operating profit is expected in the second half this year.

Hyosung Advanced Materials is also expecting profit growth.

This year’s operating profit of the dominant player in the global tire code market is estimated at 316.2 billion won, similar to last year’s 315.1 billion won. The figure, however, is expected to reach 380.7 billion won next year, with an anticipation of earnings growth driven by the company‘s plan to accelerate its production of carbon fiber, a high-value-added product.

“Hyosung Advanced Materials has expedited its plan to expand its manufacturing of carbon fiber to produce 14,000 tons by 2024, moving one year up from the initial plan for the production target by 2025, in response to increased orders and a consequential increase in pre-sales contracts,” said Yoon Jae-sung, an analyst at Hana Securities Co.

The analyst added that the company is facing an increase in orders in line with growth of green markets.

Some analysts project that the stock price increases among key subsidiaries will lead to a revaluation of the holding company’s stakes in those companies.

“Anticipation of China’s economic recovery remains strong in the second half of this year, despite the resurgence in Covid-19 in China,” said Yang Ji-hwan, an analyst at Daishin Securities Co.

Hyosung TNC is expected to see growth in spandex sales and improvement in spreads while Hyosung Advanced Materials is likely to have a gradual recovery before a surge in the operating profit in 2024, Yang added.

By Kang In-seon and Chang Iou-chung

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]