Hyosung TNC, a spandex-focused corporations, rose more than 5% in early trading on the 13th. Buying picked up after brokerages said spandex prices continue to climb, raising expectations for improved earnings.
As of 10 a.m. that day, Hyosung TNC was trading at 491,000 won, up 27,000 won (5.82%) from the previous session. It climbed to as high as 504,000 won in early trading, marking a 1-year high.
NH Investment & Securities raised its target price for Hyosung TNC that day to 620,000 won from 510,000 won.
Choi Young-gwang, an analyst at NH Investment & Securities, said, "Unlike most refining and chemical product prices that rose on the back of the oil price surge in March, spandex prices have continued to rise since the start of the year, supported by an improved supply-demand balance," and noted, "Because BDO, the main raw material for spandex, is produced from coal, Hyosung TNC is relatively free from risks of disruptions in materials and supplies procurement or facility operations, which is also positive."
Based on the positive trends in key indicators of the spandex industry, earnings are also expected to improve.
Choi said, "It is estimated that the rise in spandex prices began to be reflected in Hyosung TNC's selling prices from March, so the increase in selling prices is expected to be larger in the second quarter than in the first quarter."
Choi added, "While most refining and chemical corporations are expected to see operating profit decline in the second quarter due to a backwardation effect (a deterioration in profitability caused by a time lag between raw material input and product sales) after a rebound in the first quarter, Hyosung TNC is expected to continue its operating profit growth in the second and third quarters, delivering differentiated results within the sector."