Kolon Plastics (138490 KS)

Company Report
Kolon Plastics
(138490 KS)
BUY (I) / TP: W9,000 (I)
POM capacity add to bear fruit over 2012~2013
Sung-ho Park
[email protected]
+822-3770-3476
Operating profit to double in 2013 vs 2011
Kyu-won Hwang
[email protected]
+822-3770-3564
 In Jan 2012, Kolon Plastics’ POM (polyoxymethylene) capacity nearly doubled
from 27,000 tpa to 57,000 tpa and compound from 25,000 tpa to 50,000 tpa.
We expect 2013 operating profit to double 2011’s as capacity additions are
fully reflected in earnings and steam purchase costs fall with the start of
operations at Gimcheon Energy, in which affiliate Kolon E&C has a stake.
Global robust auto sales to translate into rising demand for POM
 Global light vehicle sales should grow 7.7% y-y to 80.33mn units in 2012.
Auto sales are expected to be robust in most regions, with sales in North
America up 10.6% y-y, Japan 15.3%, and China 11.4%, although sales in
western Europe are expected to fall 0.4%. This should translate into stronger
demand for POM.
Feb 13, 2012
KOREA
Chemical
Share price (won, Feb 9)
6,360
Paid-in capital (Wbn)
29
Market cap (Wbn)
184
BPS (won)
1,977
Net debt to equity (%)
-2.2
Shares outstanding
POM makers have strong pricing power
 POM makers can control prices by adjusting supply, and they can easily raise
POM prices when raw material costs increase. Also, their operating margins
rise when raw material prices fall.
29,000,000
Avg daily T/O (2M, Wbn)
1
Avg daily vol (2M, shrs)
215,999
52-week high (won)
10,950
52-week low (won)
4,500
Foreign ownership (%)
0.20
Major shareholders (%)
Initiate at BUY and W9,000 target price
 Rally expected in 1H12 on momentum from POM capacity addition.
 Booming Chinese auto market to prop up POM demand. Operating profit to
double over 2012~2013.
Kolon Industries 70.0
Stock performance (%)
Absolute
Relative
Abs (US$)
1M
3M
16.7
1.3
5.8
(4.1)
20.4
1.3
12M
FY ends Dec
(%)
12,000
180
160
140
8,000
120
100
6,000
80
60
4,000
2,000
KOLON PLASTICS(LHS)
Rel. to KOSPI(RHS)
20
0
0
Jun 2011
40
Sep 2011
Dec 2011
Source: Datastream
www.tys.co.kr/english
(Wbn)
2009
2010
2011P
2012E
2013E
123.4
166.1
209.2
280.1
311.7
Chg (% y-y)
45.9
34.5
26.0
33.9
11.3
Reported OP
10.9
11.7
12.8
20.3
28.0
Adjusted OP*
10.9
11.7
13.5
19.6
27.4
7.9
9.0
10.6
15.0
21.5
EPS, CI (won)
390.6
444.5
421.8
516.5
743.0
Chg (% y-y)
Sales
(won)
10,000
Forecasts and valuations
NP, CI
266.0
13.8
-5.1
22.4
43.9
P/E (x)
0.0
0.0
12.2
12.3
8.6
P/B (x)
0.0
0.0
1.7
1.8
1.6
EV/EBITDA (x)
0.3
0.0
11.3
7.3
5.0
ROA (%)
12.5
12.1
8.1
7.8
9.8
ROE (%)
31
25
16.7
16
19.7
Note: * Adjusted OP = reported OP (K-IFRS) – other operating profit/loss. CI = controlling interest
Source: TONGYANG Securities
TONGYANG Research
Kolon Plastics (138490 KS)
I. Engineering plastics maker with earnings mtm
Focus on momentum
from capacity addition in
2012:
POM 27k  57k tpa
compound 25k  50k tpa
We suggest Kolon Plastics as a promising chemical small-cap for 2012. We believe it
will enter a profit growth stage in 2012~2013 thanks to the growth of downstream
industries and expanded production capacity. Its key products are engineering plastic
products for automobiles, electric and electronic parts, and household materials such
as polyacetal or polyoxymethylene (POM), polyamide (PA), and polybutylene
terephthalate (PBT).
We expect earnings momentum in 2012~2013 thanks to capacity additions. With
Gimcheon POM Plant #2 beginning operation in Jan 2012, the company’s POM
capacity doubled from 27k to 57k tpa and compound capacity from 25k to 50k tpa.
POM demand sufficient given
2012 global new vehicle sales
estimated at 7.7%
Investors should see whether there is sufficient demand for added POM capacity in
2012, but we believe POM demand will be enough on expected growth of the global
auto market. According to JD Power, global new light vehicle sales should rise 7.7%
y-y to 80.33mn in 2012. In particular, China’s new vehicle market is forecast to grow
11.4% y-y in 2012, which should ensure plenty of demand for POM. We expect
utilization at the new POM plant 2 to rise from 88.8% in 2012 to 105.0% in 2013.
Risk: trade secret
lawsuit between Kolon
Ind and DuPont
Meanwhile, the trade secret lawsuit between parent company Kolon Ind and DuPont
may weigh on Kolon Plastics. Among its 70% stake in Kolon Plastics (20.3mn shares),
Kolon Ind may keep 50% to ensure management control and sell the excess (5.8mn
shares) to pay damages to DuPont. The lock-up period ended Dec 15, 2011, but
potential overhang risk would likely fade if the damages levied on Kolon Ind are
reduced from the current US$919.9mn, or if Kolon Ind and DuPont settle out of court.
[Chart 1] Gimcheon plant
expansion
[Chart 2] Sales breakdown by
downstream industry
[Chart 3] Sales breakdown by
product
Other
5%
New
compound
plant
PBT
11%
Household
materials 15%
Other
8%
POM
36%
New POM plant
Packaging
facility and
warehouse
POM:
existing
POM plant
Source: Company data
2  TONGYANG Securities Inc.
Electric and
electronic parts
20%
Autos
60%
Note: As of 2010, Source: Company data
PA66
25%
PA6
20%
Note: As of 2010, Source: Company data
Company Report
II. 2012~2013 prospects: operating profit to double
2013 OP to double vs
2011
Kolon Plastics’ prospects over 2012~2013 can be summed up as “operating profit
doubling on capacity addition.” We expect the effect of POM and compound capacity
additions to be fully reflected in earnings and steam purchase costs to fall with the
start of operations at Gimcheon Energy. As a result, operating profit should rise
119.4% from W12.7bn in 2012 to W28bn in 2013.
2012 sales estimated at
W280.1bn (33.9% y-y)
In detail, we expect 2012 sales of W80.1bn (+33.9% y-y), operating profit W20.3bn
(+59.8% y-y), and net profit W15bn (+40.3% y-y), and 2013 sales of W311.7bn
(+11.3% y-y), operating profit W28bn (+37.9% y-y), and net profit W21.6bn
(+43.9% y-y). From 2011 to 2013, we expect sales to grow 49.0%, operating profit
119.4%, and net profit 101.9% (see table 1).
OP W20.3bn (+59.8%)
NP W15bn (+40.3%)
2013 sales estimated at
W311.7bn (11.3% y-y)
OP W28bn (+37.9%)
NP W21.6bn (+43.9%)
Operating margin
estimated at 6.1% in
2011
-> 7.3% in 2012
-> 9.0% in 2013
Sales breakdown by product: POM sales should rise from W71.9bn in 2011 to
W128.6bn in 2012 and W150.1bn in 2013; “other EP” (PA, PBT) from W140.2bn in
2011 to W151.4bn in 2012 and W161.6bn in 2013. From 2011 to 2013, we expect
POM sales to surge 111.7% and other EP sales to grow 16.9%.
Operating margin should improve from 6.1% in 2011 to 7.3% in 2012 and 9.0% in
2013. We expect 2012 operating margin to expand 1.2%p y-y on product mix
improvement, as the POM sales portion (operating margin of 12~15%) expands.
Meanwhile, from 2H13, costs should decrease as steam purchase costs fall 10% with
the start of commercial operation at Gimcheon Energy (steam accounts for about
31.5% of POM COGS). Thus, we expect 2013 operating margin to rise 1.7%p y-y on
product mix improvement and lower steam purchase costs.
[Table 1] Earnings forecast : 2012E operating profit W20.3bn (+59.8% y-y)
2011 (K-IFRS, non-consolidated)
2012 (K-IFRS, non-consolidated)
Full-year
1Q
2Q
3Q
4Q
1QE
2QE
3QE
4QE
2010
2011
2012E
2013E
POM
6,750
6,750
6,750
6,750
14,250
14,250
14,250
14,250
27,000
27,000
57,000
57,000
Compound
6,250
6,250
6,250
6,250
12,500
12,500
12,500
12,500
25,000
25,000
50,000
50,000
POM
113.1
108.5
116.3
115.0
91.6
99.5
99.5
104.7
109.1
113.2
98.8
107.4
Compound
151.2
157.0
149.4
150.0
92.5
92.5
97.5
100.0
131.3
151.9
95.6
102.5
49.3
53.2
52.7
54
66.3
68.7
71.3
73.8
166.1
209.2
280.1
3,117
POM
16.9
16.8
18.3
18.9
29.2
32.5
32.6
34.4
59.6
70.9
128.6
1,501
Other EP
32.4
36.4
34.4
35.1
37.1
36.2
38.8
39.4
106.5
138.3
151.4
1,616
Operating profit (Wbn)
3.7
3.4
2.7
2.9
4.2
5.2
5.4
5.6
11.7
12.8
20.3
280
Operating margin (%)
7.50
6.40
5.20
5.50
6.40
7.50
7.50
7.50
7.00
6.10
7.30
9.0
2.6
3
2.4
2.7
3.1
3.8
4
4.1
9
10.7
15
215
5.3
5.7
4.5
4.9
4.6
5.5
5.6
5.6
Production capacity (tpa)
Utilization (%)
Sales (Wbn)
Net profit (Wbn)
Net margin (%)
EPS (won)
5.4
5.1
5.3
6.9
445
422
516
743
Note: Compound capacity utilization is sum of Kolon Plastics’ estimated production for POM compound and other EP compound.
Compound product utilization exceeded 100% in 2011, with amount over 100% outsourced to other companies
Source: TONGYANG Securities
TONGYANG Securities Inc.  3
Kolon Plastics (138490 KS)
Investment pt 1. POM demand to grow on robust global auto sales
POM capacity 27k
→ 57k tpa
POM production capacity climbed from 27k to 57k tpa in Jan 2012, as the company
built new facilities at the Gimcheon plant. We expect utilization at the new POM plant
#2 to rise from 88.8% in 2012 to 105.0% in 2013, and sales volume to climb 84.3%
y-y to 56,325 tonnes in 2012 and 8.7% y-y to 61,200 tonnes in 2013.
2012 global new vehicle
sales estimated at
80.33mn units (+7.7%
y-y)
Global new vehicle market growth should boost POM demand in 2012, as the auto
industry accounts for 34.7% of global POM demand (as of 2009). According to JD
Power, global new light vehicle sales should rise 7.7% y-y to 80.33mn in 2012, with
new vehicle sales strong in most regions excluding western Europe (-0.4% y-y):
North America +10.6% y-y, Japan +15.3% y-y, and China +11.4% y-y (see chart
4~5). In particular, China’s new vehicle market is expected to post a CAGR of 11.0%
through 2016 on increasing per-capita income and expanding transportation
infrastructure (chart 5). China is the world’s largest auto market, with the highest
sales volume, but is still in the early stage of motorization, with only 50 vehicles per
1,000 people. Based on expectations for China’s motorization, global automakers,
including Hyundai and Kia, have raced to expand production capacity there. We
expect the combined production capacity of seven key global automakers to grow an
average of 11.1% per year over 2011~2015 to reach 14.48mn units/year (chart 6).
Global new vehicle sales
growth likely to boost
POM sales at Kolon
Plastics
We believe Kolon Plastics will benefit fully from the growth of the global new vehicle
market, as exports account for 70% of POM sales and the company has overseas
trade networks in around 90 countries. It has already been recognized for its
technological prowess, with Gimcheon POM plant #1 exporting POM mainly to North
America, Europe, and Japan, where entry barriers are high. The new POM plant #2
was built to target China, which has posted a 14% CAGR since 2006. Although
Chinese companies are increasing their POM production capacity, China is easier to
enter than developed markets because local players mainly make low-priced POM for
zippers and toys.
POM applications for
auto expand from fuel
gauges to interiors
POM is mostly used for parts for automobile fuel gauges, but has been increasingly
used for automobile interiors. Kolon Plastics has already launched POM products for
auto interiors, such as door latch housings and slide guides (chart 7). Because POM
contains formaldehyde, which is harmful to the human body, the company developed
POM with low volatile organic compounds (VOC; less than 1ppm) and is able to massproduce it at Gimcheon POM plant #2. Kolon’s POM is high quality, considering that
global automakers require less than 5ppm of formaldehyde in POM. Moreover, given
about 20% higher prices for low-VOC POM than high-VOC POM, we expect low-VOC
POM to boost Kolon’s margins. However, investors should take a long-term approach,
as low-VOC POM now accounts for just 5% of the total POM market.
→ Kolon Plastics to see
rising sales of low-VOC
POM
4  TONGYANG Securities Inc.
Company Report
[Chart 4] Global light vehicle sales volume
(mn units)
Global sales volume
120
Chg (% y-y)
[Chart 5] Chinese light vehicle sales volume
(%)
16
14
1 3 .3
100
10
7 .3
80
6 .3
7 .7
5 .4
60
3 .1
To post 7.2% CAGR
in 2011~2016
6
20
4
15
50
47.8
40
32.8
30
To post 11.0% CAGR
in 2011~2016
2013
2014
2015
11.4
2009 2010
2016
Source: JD Power, TONGYANG Securities
9.5
15.3
8.1
10
2.9
0
-6
2012
20
11.0
5
-4
2011
60
10
-2
0
2010
Chg (% y-y)
25
8
0
(3 .2 )
2009
35
(%)
2
40
20
Chinese sales volume
30
12
9 .6
(mn units)
2011
0
2012 2013
2014
2015 2016
Source: JD Power, TONGYANG Securities
[Chart 6] Global automakers’ production capacity forecast in China (2011~2015)
('0 0 0 units )
2011
2012
2013
2014
2015
4 ,5 0 0
4 ,0 0 0
Seven global automakers'
capacity in China to post a
11.1% CAGR in 2011~2015
3 ,5 0 0
3 ,0 0 0
2 ,5 0 0
2 ,0 0 0
1 ,5 0 0
1 ,0 0 0
500
0
GM
Ford
VW
T oyota
H onda
N is s an
H yundai +
Kia
Source: Markline, TONGYANG Securities
[Chart 7] Kolon Plastics’ POM products for auto interior
POM for auto interiors
Door latch housing
Slide guide
HAVC switch shaft & cam
Actuator gear
Speaker grille
Trim clip
Cup holder
Air conditioner vent grille & knob
Lumber support
Source: Company data
TONGYANG Securities Inc.  5
Kolon Plastics (138490 KS)
Investment point 2. POM makers have strong pricing power
POM makers hike prices
when raw material
prices rise
Global POM makers, including DuPont, enjoy pricing power based on supply control,
and they can easily raise prices when raw material costs rise. Kolon Plastics raised its
POM price by about 3% in 3Q11, when methanol prices went up around 9%. POM
COGS breaks down as: raw materials (methanol) 35%, utilities (electricity + steam)
35%, and other fixed costs 30%. To maintain margins, a methanol price hike of 10%
can be covered by a POM price hike of 3~4%. Moreover, POM margins tend to expand
when raw material prices decline (in six out of nine times that methanol prices have
dropped since 2009, POM prices were either maintained or raised (chart 8)).
Methanol price to
fluctuate between
US$400/T and
US$450/T in 2012
Although POM products are subject to less raw material risk than other petrochemical
products, a sudden rise in methanol prices could weigh on margins over the short
term. Methanol prices rose from US$354/tonne in 2Q11 to US$386/tonne in 3Q11
and US$393/tonne in 4Q11. However, we expect methanol prices to stay in the
US$400~450 range, not exceeding US$450/tonne, because Chinese manufacturers of
coal-based methanol break even at US$450~500/tonne and will likely raise utilization
from the current 30~50%, causing an oversupply. For reference, China accounts for
around 40% of global methanol production capacity of 76mn tpa.
China’s methanol COGS
estimated at over
US$400/tonne
Chinese methanol plants’ utilization rates are low because of their production method.
There are two production methods, natural gas-based and coal-based, and China
built a number of coal-based methanol plants near coal mines in the early-2000s,
when coal prices were at US$20~30/tonne. These methanol plants lost price
competitiveness in the late 2000s as coal prices rose (chart 9), given that their COGS
is estimated to exceed US$400/tonne when coal is at US$120/tonne. In contrast,
COGS for the natural gas-based methanol of the Middle East and South America is
estimated at US$200/tonne.
[Chart 8] POM and methanol (raw material) prices
(US$/tonne)
2,500
[Chart 9] Coal and natural gas prices (annual average)
(US$/tonne)
700
POM (LHS)
Methanol (RHS)
600
2,000
500
(US$/tonne)
300
60
200
40
100
20
0
00
01
02
03
04
05
06
07
08
Source: Cischem, KITA, TONGYANG Securities
6  TONGYANG Securities Inc.
09
10
11
9
8
100
1,000
0
10
Natural gas (RHS)
120
400
POM price rose when methanol
price declined
Coal (LHS)
140
1,500
500
(US$/mmbtu)
7
6
80
5
4
C oal pric e ↑
N atural gas pric e ↓
3
2
1
0
0
2000
2002
2004
2006
Source: Bloomberg, TONGYANG Securities
2008
2010
Company Report
Investment pt 3. Compound capacity expansion to benefit POM
Compound capacity
doubles to 50,000T
Compound production capacity doubled to 50,000 tonnes in Jan 2012, with the newly
built Gimcheon plant’s capacity (25,000 tonnes) adding to KSI’s (Kolon Sangju
Industry; Kolon Plastics has 40% stake) capacity (25,000 tonnes). Gimcheon plant
#2’s utilization rate is expected to reach 82.5% in 2012 and 100% in 2013. As a
result, total compound production capacity should reach 456.2mn tonnes (+20.2% yy) in 2012 and 500mn (+9.6% y-y) in 2013.
Compound capacity
expansion effects to
benefit POM products
The expansion of compound production capacity should mostly benefit the POM
business, since 20% of POM products are compound products. We expect POM
compound production to grow 84.3% y-y to 11,265 tonnes in 2012 and 8.7% y-y to
12,240 tonnes in 2013. Other EP compound production should rise 7.8% y-y to
34,360 tonnes in 2012 and 9.9% y-y to 37,760 tonnes in 2013.
Compound business structure is as follows: 20% of POM base chips produced at the
Gimcheon plant and all outsourced PA and PBT base chips are compound products, on
which Kolon Plastics sees operating margins of 3~5%. Until 2011, compound
products were mostly produced by KSI facilities (25,000 tpa) and the rest through
outsourcing. In 2011, we estimate that Kolon Plastics’ compound products broke
down as 6,113 tonnes of POM and 31,860 tonnes of other EP (around 13,000 tonnes
out of these through outsourcing). In 2012, it will produce all compound products on
its own thanks to capacity expansion. We believe it exported 70% of its POM products
in 2011 and sold 90% of its PA and 60% of its PBT products in Korea. The auto
industry is the most important downstream industry.
EP compound business
to keep growing on
rising global new car
sales
Benefits from vehicle
weight reduction small
The compound business should continue to grow thanks to carmakers’ rising
production at domestic plants, and larger exports on favorable global auto industry
conditions. The business is also likely to benefit, albeit modestly, from the trend of
reducing vehicle weight amid stricter fuel efficiency standards. In Korea, plastics
account for 12% of auto materials, and of these plastics, engineering plastics make
up 18% (chart 10~11). If the plastics portion of auto materials increases from the
current 12% to 23% (the level in Germany) and the EP portion of auto plastics
remains unchanged at 18%, we expect the EP portion of auto materials to increase
by 2%p (+9% x 18%).
[Chart 10] Auto material
breakdown in Korea
[Chart 11] % of plastic used for car
production in Korea
[Chart 12] % of plastic components
in cars, by nation
(A s of 2 0 0 7 )
23%
O thers
O thers
Rubber 4 %
EP
11%
5%
18%
TPO
N onferrous metal
12%
38%
63%
2011
2011
A BS
8%
9%
6%
9%
M etal 6 3 %
Source: Chemlocus
Source: Chemlocus
avg
Global
Korea
US
PVC
17%
Germany
PU
13%
China
Plastic 12%
Source: Company data
TONGYANG Securities Inc.  7
Kolon Plastics (138490 KS)
III. Initiate at BUY with target price of W9,000
Initiate at BUY with
target price of W9,000
We initiate coverage of Kolon Plastics at BUY with a target price of W9,000, based on
sum-of-the-parts. For our target, we added operating asset value (W281.8bn or
W9,700/share) to investment asset value (W2.5bn, W100/share), then subtracted
net debt (W23bn, W800/share). We calculated operating asset value based on a
2013E EBITDA of W36bn and EV/EBITDA of 7.8x (the benefits of capacity expansion
will be 100% reflected in 2013). Investment asset value of W2.5bn is based on a P/B
of 1.0x and subsidiary KSI’s book value (table 2).
Shares plunged in July
after a surge in June,
and moved rangebound since October
Kolon Plastic shares listed at W4,300 on Jun 15, 2011 and surged to W10,950 (2011
P/E of 26.0x) as of Jun 22 on expectations for the growth potential of the engineering
plastic business and POM capacity expansion, but then tumbled to W4,500 (2011 P/E
of 10.7x) on Sep 26 due to the burden of high valuation, fears of global economic
slowdown, and the Dupont lawsuit against Kolon Industries. Since October, shares
have moved in the range of W5,000~6,000 due to a lack of additional earnings
momentum and its existing facilities already being at full utilization.
Capacity expansion
effects to boost shares
in 1H12
Capacity expansion effects should boost shares in 1H12. In Jan 2012, POM plant #2’s
utilization rate rose close to 90%, above previous expectations, implying solid market
demand. If earnings improve in 1Q12, shares should advance more strongly.
[Table 2] Target price set at W9,000 (reflecting 100% of POM capacity expansion effects in 2013) (Wbn)
As of Feb 10,
2012
(+)
Operating asset value
281.8
Business value
▶Engineering Plastics
Total
Operating profit
Depreciation cost
EBITDA
Multiple
Fair business value
27.4
8.6
36.0
7.8x
281.8
27.4
8.6
36.0
7.8x
281.8
* Fair EV/EBITDA: {(1-t) – (depreciation/EBITDA) * (1-t)} / WACC = {(1-22%) – (W36.0bn/W8.6bn) * (1-22%)} / 7.6% = 7.8x
(+)
Investment asset value
2.5
Investment assets
KSI
Total
(-) Net debts
Stake
Book value
(as of Sep 2011)
P/B
39.64%
2.5
1.0x
2.5
2.5
1.0x
2.5
23.0
Total debts
27.7
Cash & cash equivalents
4.8
Common stock value (A)
Shares outstanding (B)
Shareholder value/share (A/B)
Source: TONGYANG Securities
8  TONGYANG Securities Inc.
261.3
29mn
W9,010
Note: earnings to grow on POM capacity expansion effects over 2012~13
Fair value
Company Report
Kolon Plastics (138490 KS) pro forma financial statements (K-IFRS, non-consolidated)
Statement of financial position
FY to Dec (Wbn)
Statement of comprehensive income
2009
2010
2011E
2012E
2013E
27
34
101
114
109
Investment in affiliate
0
0
3
3
LT financial assets
2
2
0
25
31
1
Non-current assets
Tangible assets
Other non-current
Current assets
2009
2010
2011E
2012E
2013E
Sales
123
166
209
280
312
3
Cost of sales
105
144
183
245
267
0
0
Gross profit
18
23
26
35
44
97
109
104
7
11
13
16
17
1
1
1
1
Reported op prof
11
12
13
20
28
Adjusted op prof
11
12
14
20
27
0
0
-1
0
0
-2
-1
0
-1
0
1
40
48
79
91
125
Cash & equivalent
5
6
5
5
29
ST financial assets
0
0
0
0
0
FY to Dec (Wbn)
SG&A
Other op prof/loss
Non-operating prof
Accts rec & other
14
15
27
35
40
Interest income
0
0
0
0
Inventory
20
26
40
42
47
Interest expense
1
1
1
2
1
0
1
6
8
9
Forex gain/loss
0
0
0
0
0
68
82
180
205
234
Equity-meth gain/loss
0
0
1
0
0
2
2
3
3
3
Other
0
0
0
0
0
0
0
0
0
0
Pre-tax from cont op
9
11
13
19
28
Other current
Total assets
Non-current liabilities
LT financial liabilities
Other non-current liab
Current liabilities
Accts payable & other
ST financial liabilities
Other current
1
1
1
1
1
Income tax
2
2
2
4
6
34
39
90
102
113
Net profit
8
9
11
15
22
23
30
59
76
86
8
5
28
22
22
NP for controlling int
Total comprehensive inc
9
11
15
22
9
10
15
21
3
4
3
4
4
8
9
10
15
21
Total liabilities
36
41
93
105
115
EBITDA
13
13
16
28
36
Equity for controlling int
32
41
87
100
119
Free cash flow
13
4
-58
9
26
20
20
29
29
29
EPS
391
445
422
517
743
1,553
1,998
3,005
3,462
4,095
0
0
50
100
100
619
656
613
961
1,240
2010
2013E
Paid-in capital
TCI for controlling int
8
8
Capital surplus
0
0
28
28
28
Book value/share
Retained earnings
7
16
30
44
63
Dividend/share
0
0
0
0
0
32
41
87
100
119
3
-1
23
16
-7
2009
2010
2011E
2012E
2013E
15
12
-25
30
29
Gross margin (%)
Net profit
8
9
11
15
22
Depreciation & amortization
2
2
2
8
9
Forex translation gain/loss
0
0
1
-1
-1
Equity for non-control int
Total equity
Net debt
Cash flow statement
FY to Dec (Wbn)
Operating cash flow
EBITDA/share
Valuation
FY to Dec
2011E
2012E
14.6
13.5
12.6
12.6
14.3
Operating margin (%)
8.8
7.0
6.5
7.0
8.8
Net margin (%)
6.4
5.4
5.1
5.4
6.9
10.2
8.0
7.4
10.0
11.5
EBITDA margin (%)
Affiliate invest gain/loss
0
0
-1
0
0
45.9
34.5
26.0
33.9
11.3
Inc (dec) in net working cap
5
0
-39
6
-1
Operating profit (% y-y)
105.0
7.4
15.9
45.1
39.5
Other
1
0
-8
-1
-1
Net profit (% y-y)
266.0
13.8
17.8
40.9
43.9
-2
-8
-67
-21
-2
EPS (% y-y)
266.0
13.8
-5.1
22.4
43.9
-2
-8
-67
-21
-3
EBITDA (% y-y)
39.5
6.1
16.0
80.3
29.0
Inc (dec) in intang asst
0
0
0
0
0
ROE (%)
31.0
25.0
16.7
16.0
19.7
Inc (dec) in ST/LT finl asst
0
0
0
0
0
ROA (%)
12.5
12.1
8.1
7.8
9.8
Investing cash flow
Disp (acq) of tangible asst
Other
Sales (% y-y)
2009
0
0
0
0
1
Accts rec turnover (x)
9.6
11.2
9.9
9.0
8.4
-13
-3
92
-9
-4
Inventory turnover (x)
6.2
7.2
6.3
6.8
7.0
-12
-3
56
-6
1
P/E (x)
0.0
0.0
12.2
12.3
8.6
Inc (dec) in equity
0
0
37
0
0
P/B (x)
0.0
0.0
1.7
1.8
1.6
Dividend payout
0
0
0
-2
-3
EV/EBITDA (x)
0.3
0.0
11.3
7.3
5.0
-1
0
-2
-2
-1
Div yield (com shr, %)
1.0
1.6
1.6
0
1
-1
0
23
Financing cash flow
Inc (dec) in ST/LT finl liab
Others
Inc (dec) in cash & eq
Beginning cash & equiv
5
5
6
5
5
Ending cash & equiv
5
6
5
5
29
Debt-to-equity (%)
114.2
101.9
106.3
104.2
97.2
Net debt-to-equity (%)
8.5
-2.2
25.9
16.1
-5.6
Net fin cost/sales (%)
0.6
0.2
0.3
0.5
0.2
12.0
24.0
18.0
12.5
23.0
OP/financing cost (x)
Note: EPS, BPS, P/E and P/B are based on controlling interest
For valuation metrics such as P/E, historical figures are based on annual averages, estimates on current price
For ROA or ROE, assets and equity are averages of end-of-year figures for given year and year prior
Data to 2010 based on K-GAAP and from 2011, K-IFRS
Source: TONGYANG Securities
TONGYANG Securities Inc.  9
Kolon Plastics (138490 KS)
Kolon Plastics (138490 KS) ratings and target price history
(won)
1 2 ,0 0 0
C urrent pric e
T arget pric e
Date
Rating
TP (won)
2012/02/10
BUY
9,000
1 0 ,0 0 0
8 ,0 0 0
6 ,0 0 0
4 ,0 0 0
2 ,0 0 0
0
J un 2 0 1 1
N ov 2 0 1 1
Source: TONGYANG Securities
Disclosures & disclaimers
This research report has been prepared for informational purposes only; it does not constitute an offer or a
solicitation of an offer to buy or sell any securities or other financial instruments. The information and data
contained in this report have been obtained from sources we consider reliable; however, we make no
representation that the information provided in this report is accurate or complete, and it should not be relied on
as such. The recipient of this report should use his/her independent judgment regarding the sale or purchase of
any securities or financial instruments mentioned herein. We disclaim any liability whatsoever for any direct or
consequential loss arising from any use of this report or its contents. This report is for our clients only. It is
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prior written consent of TONGYANG Securities Inc.
As of the publication date of this report, TONGYANG Securities Inc. does not own a stake in excess of 1%, nor
does it have any interest whatsoever, in the subject company (ies). The material contained herein was not
disclosed by TONGYANG Securities Inc. to any institutional investors or third parties prior to its publication. The
analyst (s) of this report or the analyst (s)’ spouse does not have any financial interest in the securities of the
subject company (ies) mentioned herein, nor financial interest of any nature related to the subject company (ies)
(including without limitation, whether it consists of any option, right, warrant, future, long or short position), as of
the publication date of this report.
Analyst certification
I/We, as the research analyst/analysts who prepared this research report, do hereby certify that the views
expressed in this report accurately reflect my/our personal views about the subject securities discussed in this
report.
Stock and sector ratings
 Stock ratings include an Investment Rating (Buy, Hold, Sell) as well as a Volatility Risk Rating (High, Low)
that are based on the expected absolute return of a stock over the next 6 -12 months.
- Buy: Low Risk if a stock is expected to return 10% or more; High Risk if a stock is expected to return 20% or
more
- Hold: Low Risk if a stock is expected to return between -10 and +10%; High Risk if a stock is expected to
return between -20 and +20%
- Sell: Low Risk if a stock is expected to decline by 10% or more; High Risk if a stock is expected to fall by
20% or more
 Sector ratings suggest 6 to 12 - month forward investment weighting of a given sector compared to its
market capitalization weighting.
- Overweight: Investment weighting is higher than the market capitalization weighting
- Neutral: Investment weighting is equal to the market capitalization weighting
- Underweight: Investment weighting is lower than the market capitalization weighting
10  TONGYANG Securities Inc.
TONGYANG Securities International Network
Company Report
Seoul
Head Office
TONGYANG Securities Building
Euljiro 76 Jung-gu
Seoul, Korea 100-845
Tel: +822-3770-3454
Corporate website: www.tys.co.kr/english
Research Center
TONGYANG Securities Building
#32 Gookjegeumyoongro 2-gil
Youngdeungpo-gu, Seoul, Korea
Tel: +822-3770-3436
Hong Kong
TONGYANG Securities Hong Kong Limited
Unit 3208-09, 32/F, Alexandra House
18 Chater Road, Central, Hong Kong
Tel: +852-3980-6000
New York
150 East 52nd Street
25th Floor New York
NY 10022, U.S.A.
Tel: +1-212-415-1008
Tokyo
803-3-4-1, Shin-Kokusai Building
Maronouchi, Chiyoda-ku
Tokyo, Japan 100-0005
Tel: +81-3-6269-9720
Ho Chi Minh
Suite 2905, Saigon Trade Center
37 Ton Dou Thang Street
District 1, Ho Chi Minh City, Vietnam
Tel: +84-8-910-6711
Manila
TONGYANG Savings Bank
Ground Floor, Chantham House
116 Valero Corner, Herrera Street
Salcedo Village, Makati City
Metro Manila, Philippines
Tel: +63-2-845-3838
Phnom Penh
#138, Norodom Boulevard
Sangkat Tonle Bassac
Khan Chamkarmorn
Phnom Penh, Cambodia
Tel: +855-23-224-125
TONGYANG Securities Inc.  11