1. Q2 2025 Performance: A Story of Contrasts

TKG Huchems reported sales of KRW 290.2 billion (slightly down YoY), operating profit of KRW 21.9 billion (beating estimates by 11%), and net income of KRW 18 billion (falling short of estimates by 13%). Cost-cutting efforts boosted operating profit, but declining sales and losses from derivatives impacted net income negatively.

2. Unpacking the Decline: Sales and Derivatives

The decrease in sales is primarily attributed to lower sales volumes in NT and NA product lines. The decline in net income was significantly influenced by losses from derivative valuations. External factors, including the global economic slowdown and raw material price volatility, also played a role.

3. Positive Catalysts: Expanding Capacity and New Business Ventures

  • Capacity Expansion: The completion of Nitric Acid Plant No. 6 and MNB Plant No. 2 is expected to lead to economies of scale and improved cost competitiveness.
  • New Business Development: The new technology certification for phenylenediamine (PDA) manufacturing signals potential growth through new business ventures.
  • Strong Financial Position: A low debt-to-equity ratio enhances the company’s resilience to external market fluctuations.

4. Investment Strategy: Maintain Neutral Stance, Manage Risks

While TKG Huchems possesses a stable business structure and growth potential, investors should closely monitor the reversal of declining sales, the concrete performance of new business ventures, and the impact of raw material price fluctuations. Consider a long-term investment approach with continuous monitoring and active risk management.