iM Securities said on the 20th that Hyosung(004800) will benefit from separated taxation on dividend income and the amended Commercial Act. It maintained a "Buy" investment opinion and a target price of 185,000 won. Hyosung's previous trading day closing price was 143,100 won.
iM Securities noted that Hyosung's subsidiaries are showing solid results and are in an environment of expanding dividends, and saw a high possibility that this year's dividend per share (DPS) will be raised to meet the requirements for separated taxation on dividend income.
Looking at Hyosung's DPS trend, it maintained a high-dividend stance with 5,000 won in 2018–2020, 6,500 won in 2021, 4,500 won in 2022, 3,000 won in 2023, and 3,000 won in 2024.
In this environment, a separated taxation system for dividend income was introduced, applied temporarily from dividends paid on or after Jan. 1 this year through dividends attributable to the fiscal year that includes Dec. 31, 2028.
Researcher Lee Sang-heon of iM Securities said, "Previously, for the portion of financial income such as interest or dividends exceeding 20 million won, comprehensive income tax had to be paid at a rate of 14%–45%, but from now on, for high-dividend corporations' dividend income, the portion exceeding 20 million won will be taxed separately at a rate of 14%–30%," and added, "To qualify as such a high-dividend corporation, the payout ratio must be at least 40%, or at least 25% with dividends increased by 10% year over year."
Accordingly, Hyosung finalized last year's DPS at 5,000 won, meeting the high-dividend corporation criteria with a payout ratio of 25.3% and dividends up 66.7% from the previous year.
Lee said, "This year as well, with subsidiaries such as Hyosung Heavy Industries posting strong results, an environment has formed in which Hyosung can increase dividends, and to meet the high-dividend corporation threshold, DPS is expected to be raised by at least 10% to 5,500 won or more," and analyzed, "Since the largest shareholder is an individual and the equity stake is high, Hyosung may have a higher likelihood of sustaining future dividend increases to receive the application of separated taxation on dividend income."
Also, the second amendment to the Commercial Act, which takes effect starting Sept. 10, includes expanding separate elections of audit committee members for large listed companies.
In the case of holding companies like Hyosung, it was expected that strengthening oversight independent of controlling shareholders and enhancing the effectiveness of internal controls would make the effects of corporate governance improvements visible.