Refer Report

Here is ‘Ant (individual investor)’ with 18 years and 1 month of stock investment experience. While serving in the military at Baengnyeong Island in Incheon, he enjoyed books on stocks. As a college student, he experienced returns of more than 100% due to ‘beginner’s luck’. He is a ‘fighting ant’ who has experienced everything from mountain delisting to expert group chat fraud, and other mountain and air battles. ‘Battle ants’ is a word he usually uses to describe a situation in which he invests in stocks to win every time, based on the idea that ‘stocks are a battlefield.’ I am well aware that the pain of loss when investing in stocks is greater than that of anyone else, so I am writing today from the perspective of individual investors.

“I took out a credit loan of about 10 million won without my wife’s knowledge. I decided that it was an undervalued company and bought all of Kolon ENP, but in less than two months, it was down 10%. “I’m at a loss as to how to pay the loan interest and what to say to my wife.”

Mr. Yoo, an office worker in his 30s, sighed heavily during a phone call with a reporter on the 29th. He started investing in stocks in 2019, when COVID-19 was spreading nationwide, and after enjoying profits for two years, he is seeing the ‘bitter taste of stocks’ from 2022.

Regarding the background of investment in Kolon ENP, Mr. Yu said, “It attracted attention that it is doing well even though the chemical industry is sluggish with attractive business areas such as engineering plastics, which are used as multi-purpose high value-added materials as well as electric vehicle materials that require heat resistance.” He added, “Recently, polyoxymethylene for medical use. “I decided to buy it because it has entered the (POM) market and the business prospects are bright,” he said.

I invested through my own study, but after my first purchase last month (purchased 1,500 shares at 6,940 won on August 2), I lost 10.66%. He felt like the entire chemical sector had collapsed, so he lost about 600 shares on the 13th of last month. Currently, 900 shares purchased at 6,940 won remain in his balance. Mr. Yoo said, “I really don’t know where the bottom is as it has been at the lowest price for three years,” and was frustrated that “the financial statements, including the debt ratio and capital reserve ratio, are stable, but the stock price is not rising.” He continued, “It may be a small amount of money to others, but to me, it is really a lot of money. I am contemplating whether to take out more credit loans (buy more stocks to lower the unit price) or take a loss right now.” .

Sales of top 5 engineering plastics… Global market size: KRW 140.9 billion in 2027

Kolon ENP, which Mr. Yu invested in, was established in March 1996 and produces and sells polyoxymethylene (POM), polyamide (PA6, 66), and polybutylene terephthalate (PBT) among the five major engineering plastics (EP). there is. In addition, it is an engineering plastics specialist with a diverse product portfolio including TPC-ET, PET, PP-LFT, M-PPO, and PPS, a super engineering plastic. It was listed on the stock market in June 2011.

Engineering plastic is a cutting-edge material used in core parts such as automobiles, electrical and electronic products, household goods, and industrial products, as it has excellent mechanical properties, strength, and heat resistance, and possesses various special properties required by parts. For example, in order to create next-generation electric vehicles, flame retardant materials that do not catch fire, heat dissipating materials that emit heat, materials for high-voltage charging and connectors that safely charge high-voltage current, and lightweight materials must be developed. For hydrogen vehicles, materials for hydrogen tanks, Materials with low elution of negative ions can also be used to safely store hydrogen and increase the efficiency of fuel cells. It is used in vacuum cleaners, electric ovens, coffee makers, and baby strollers, for which demand has recently increased.

Engineering plastics are expected to continue to grow, attracting attention as high-strength, high-heat resistance, and lightweight materials that replace existing metal and ceramic materials in the automobile, electrical/electronic, aerospace/aviation, and leisure sports industries. According to market research firm Markets & Markets, the global engineering plastics market size is expected to grow at an average annual rate of 5.6% over the next five years from $107.2 billion in 2022 to $140.9 billion in 2027.

Kolon ENP’s technology is at a high level. There are only four companies in the world – Europe, the US, Japan, and Korea – that have independently developed and completed POM polymerization process and production technology and are producing it on a scale of 10 tons or more, one of which is Kolon ENP. This company has comprehensive know-how on all processes from polymerization to compounding.

In particular, the core of engineering plastic technology is reliability. For example, the red button on the seat belt is POM. It is important for the seat belt to perform its function and role in any situation, as if the red button on the seat belt is not pressed in the event of a car accident, life can be taken.

“Initial supply of medical POM begins”… This year’s operating profit is expected to approach 40 billion won.

Kolon ENP is installing a new food product. On the 29th, a company official said, “We launched the M series as a medical specialty product line and are continuing to supply it to medical companies on a small scale.” He said, “Recently, the initial supply of medical POM products has begun as a global company,” and expected, “Based on this, it will be of great help in the future profitability of the company and the development of additional uses in the medical field.” The medical market is a representative high value-added market for POM.

He also said, “The engineering plastics market is receiving strict eco-friendly requirements from advanced customers, so we launched an eco-friendly brand called ‘ECO.’” He added, “We are conducting an evaluation of the entire product process to develop products with lower environmental impact than before.”

He said, “In the case of the POM business, we launched ‘ECO-B’ POM (Bio), made from urban solid waste, for the first time in Korea in 2021, and have been steadily increasing sales since last year, and ‘ECO-LC’, which lowers the carbon emissions of the product. “We plan to build a Paris line for products up to POM (Low Carbon),” he said. ‘ECO-E’ POM (Electlified), which is made from hydrogen made from renewable energy such as solar power and wind power, is also being developed.

The compound business also recycles discarded fishing nets and ropes that are thrown into the sea and threatens the marine ecosystem, and ‘ECO-R’ nylon products produced by recycling discarded airbags in response to vehicle models that comply with the EU ELV (End-of-life Vehicle Directive) to be mass-produced from 2026. The policy is to contribute to a circular economy that minimizes environmental impact by actively utilizing . He expected, “The development of various eco-friendly products will play a big role in improving profitability.”

Performance over the past five years has been stable. From sales of 330.3 billion won and operating profit of 10.3 billion won in 2019, sales increased by 38.12% and 228.16%, respectively, in four years to 456.2 billion won and operating profit of 33.8 billion won last year. Shinhan Investment & Securities forecasted sales of 489.1 billion won and operating profit of 39.7 billion won this year. The possibility is high, with sales of 244.1 billion won and operating profit of 20.2 billion won in the first half of the year.

The total number of shares is 38 million, and Kolon Industries (66.68% stake) and 4 others are the largest shareholders, holding 66.72% of shares. Foreign ownership is 1.23% and distribution volume is approximately 30%. As of the second quarter, cash assets amounted to 17 billion won and tangible assets amounted to 98.9 billion won. The debt ratio is only 29.26%.

Concerns about business expansion such as M&A… Shinhan Investment & Securities “Target price is 10,000 won”

Dividends are being increased starting from 2021. 145 won per share was paid in 2021, 180 won per share in 2022, and 160 won per share last year. A company official said, “We are doing our best to maintain a stable dividend policy,” and promised, “We will return shareholders with the goal of a dividend payout ratio of 20-40% every year.” He also added, “We will also consider expanding our business through mergers and acquisitions (M&A) to secure new growth engines.”

Regarding positive factors for investment, he said, “We possess Base Polymer (base raw material), a specialty (high value-added product) that is produced by only a few global companies called POM.” He added, “Through this, stable profitability is possible despite economic volatility as a domestic chemical company.” “This is what sets it apart.” However, he added, “In the case of the compound business, the base polymer is not produced directly, but is supplied through external sourcing and the compound resin is produced through the compounding process. Therefore, the weakness is that profitability is subject to large fluctuations depending on the fluctuations in unit prices.”

Lee Jin-myeong, a researcher at Shinhan Investment & Securities, predicted, “Operating profit in the second half will be 19.5 billion won, a slight slowdown compared to the first half, but fundamentals will still be solid.” He said, “POM’s profitability will recover again due to limited capacity expansion due to high entry barriers and an increase in the proportion of high value-added (medical) products, and compound’s profit contribution will gradually increase through production optimization amidst the rising utilization rate.” The target stock price was suggested at 10,000 won, which suggests a 61.29% upside potential compared to the current stock price.

I will run with ‘14 million ants’. I will write a lot of interesting stock articles until the day your stock account turns red. If you click Subscribe and Support Reporter Hyunjoo Yoon on the reporter’s page below, you will be able to check the articles quickly every time.

Reporter Hyunju Yoon hyunju@hankyung.com

Source: Korean