NH Investment & Securities analyzed on the 16th that Hyosung T&C's financial structure is expected to worsen during the acquisition process of the specialty gas division. As a result, the investment recommendation remains "buy", but the target price has been lowered by 17% to 350,000 won. In the previous transaction, Hyosung T&C closed at 240,500 won.
According to NH Investment & Securities, Hyosung T&C plans to acquire the specialty gas (NF3) division from Hyosung Chemical for 920 billion won on Jan. 31, 2025.
Choi Young-gwang, a researcher at NH Investment & Securities, said, "As of the end of the third quarter this year, the cash and cash equivalents held by Hyosung T&C amount to only 98.7 billion won, making a deterioration in financial structure inevitable during the funding process for the business acquisition. Hyosung T&C's net debt is expected to increase from 1.2 trillion won at the end of this year to 1.8 trillion won by the end of 2025."
Choi further noted, "Although the domestic specialty gas division has a high operating profit margin, its operating profit scale is small compared to Hyosung T&C's existing business. Moreover, due to the decreasing utilization rates and reduced investment from semiconductor clients, the proportion of Hyosung T&C's total revenue and operating profit in 2025 is expected to reach only 3% and 5%, respectively."
Nonetheless, Choi explained the reason for maintaining the investment recommendation by stating, "Considering the valid improvement trend in annual operating profit centered around spandex in 2025 and the stock price level trading at its historical lowest based on price-to-book ratio (PBR)."