PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩160 per share · Prices as of the 2026-10-02 close
HDC Hyundai EP supplies compounded plastic materials for automotive and electronics applications and has seen operating margins improve since 2022, though a sharp naphtha price surge in 2026 has renewed cost pressure.
2025 consolidated revenue reached KRW 992.7 billion with operating profit of KRW 49.7 billion (5.0% margin), a clear improvement from 2022 levels.
The PO segment (compounded PP/PE) is growing on EV and hybrid vehicle demand, while the PS and construction-materials segments are seeing revenue declines.
Since the Hormuz Strait blockade in March 2026, naphtha prices have surged sharply, and the industry is flagging reverse-lag cost pressure for the second half.
Operating margins in 1Q26 and 2Q26 came in below the 3Q25 level, suggesting cost pressure is already partly showing through.
The domestic petrochemical sector is navigating both structural oversupply from Chinese capacity expansion and government-led facility restructuring at the same time.
HDC Hyundai EP operates three business segments: the PO segment supplying plastic materials for automotive parts, electronics components, construction materials and consumer goods; the PS segment supplying PS and EPS materials for electronics and construction-material uses; and the construction-materials segment supplying fire-sprinkler piping and underfloor heating pipes.
The PO segment compounds base materials such as PP and PE into value-added B2B products, with automotive materials sold mostly through direct deals with Tier suppliers and electronics materials sold via OEM direct transactions with domestic appliance makers such as Samsung and LG and overseas customers such as Turkey's ARCELIK.
As of the first quarter of 2026, the PO segment's revenue rose 3.9% year over year, while the PS segment fell 5.2% and the construction-materials segment fell 15.0%, according to the company's disclosure.
About 70% of PE business sales are exports, with adhesive resins and matte film resins recognized for quality and sold across Europe, the Americas and Asia.
The PS segment operates production lines with annual capacity of up to 235,000 tons of PS and EPS, and has expanded supply to domestic appliance makers and overseas electronics companies.
The company began as Hyundai Industrial Development's petrochemical division in 1988, spun off in 2000, listed on the KOSPI in 2006, and changed its CEO to Shin Woo-cheol in March 2026.
Competitively, the firm competes with specialized domestic and overseas compounders as well as the materials divisions of large petrochemical companies, sourcing its PP and PE feedstock from domestic petrochemical producers.
R&D efforts are focused on lightweight materials for EVs, flame-retardant technology, and advanced reactive extrusion technology.
| Quarter | Revenue | Operating profit | Op. margin |
|---|---|---|---|
| 2025Q2 | ₩258.6B | ₩13.4B | 5.2% |
| 2025Q3 | ₩247.4B | ₩15.3B | 6.2% |
| 2025Q4 | ₩232.7B | ₩9.3B | 4.0% |
| 2026Q1 | ₩254.9B | ₩7.8B | 3.0% |
| 2026Q2 | ₩301.4B | ₩12.8B | 4.3% |
| Year | Revenue | Operating profit | Net income (parent) | Op. margin | ROE | Debt-to-equity |
|---|---|---|---|---|---|---|
| 2022 | ₩1T | ₩20.4B | ₩11.5B | 1.9% | 3.8% | 92.5% |
| 2023 | ₩1T | ₩33B | ₩17.3B | 3.3% | 5.5% | 91.1% |
| 2024 | ₩990.6B | ₩32.7B | ₩15.9B | 3.3% | 4.8% | 89.7% |
| 2025 | ₩992.7B | ₩49.7B | ₩33.1B | 5.0% | 9.3% | 87.1% |
Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-08-23
Consolidated revenue in 2025 was KRW 992.7 billion, similar to KRW 990.6 billion in 2024, but operating profit jumped to KRW 49.7 billion from KRW 32.7 billion, lifting the operating margin from 3.3% to 5.0%. Net income attributable to owners also rose sharply, from KRW 15.9 billion in 2024 to KRW 33.1 billion in 2025.
Looking at 2022 through 2025, the operating margin improved step by step from 1.9% to 3.3% to 3.3% to 5.0%, while owners' net income grew from KRW 11.5 billion in 2022 to KRW 33.1 billion in 2025, reflecting a recovery trend. However, quarterly results show variation.
Third-quarter 2025 revenue of KRW 247.4 billion generated operating profit of KRW 15.3 billion (roughly a 6.2% margin) and owners' net income of KRW 11.8 billion, the strongest margin in the recent window, whereas fourth-quarter 2025 revenue of KRW 232.7 billion produced operating profit of KRW 9.3 billion, with margin narrowing to about 4.0%.
In the first quarter of 2026, revenue was KRW 254.9 billion with operating profit of KRW 7.8 billion (roughly a 3.0% margin), and net income narrowed further to KRW 5.6 billion.
In the second quarter of 2026, revenue rose to KRW 301.4 billion, the largest in the recent window, but operating profit was KRW 12.8 billion (about a 4.3% margin) with net income of KRW 9.0 billion, showing profit improvement lagged the pace of revenue growth.
The trailing four-quarter sum (3Q25 through 2Q26) of owners' net income was about KRW 32.2 billion, indicating the annual recovery trend has continued into the recent period.
Korea's petrochemical industry remains in a phase of structural oversupply driven by large-scale Chinese capacity expansion, and Korea Ratings has issued a negative 2026 credit outlook for the sector, citing continued spread weakness amid soft demand.
In response, major players including Lotte Chemical, HD Hyundai Chemical, Yeochun NCC and SK Geo Centric are pursuing restructuring through NCC facility consolidation and closures aligned with government targets, though Korea Ratings judged that new capacity additions exceeding these cuts would prevent meaningful near-term supply-demand improvement.
In March 2026, instability in the Middle East, including tension linked to the Iran-Israel conflict, led to a blockade of the Strait of Hormuz, disrupting a shipping route through which a large share of Korea's imported naphtha passes and driving naphtha prices sharply higher; by May, naphtha prices were reported to be up 93% from the start of the year.
As a result, companies that posted profits in the first half on cheaper legacy feedstock are now concerned about a reverse-lag effect in the second half as higher-cost naphtha flows into production with a time lag.
The compounded-materials segment in which HDC Hyundai EP operates tends to carry higher value-add than commodity petrochemicals, but because PP and PE feedstock prices track naphtha, the segment is not insulated from industry-wide cost pressure.
On the other hand, demand for lightweight materials tied to EV and hybrid vehicle adoption, along with electronics materials demand tied to premium and AI-appliance expansion, is cited as a structural growth opportunity for compounders.
The company expects continued growth in the PO segment on rising EV and hybrid vehicle demand, with expanded European exports partly offsetting softer US sales cited as one dynamic. Appliance-related materials are flagged as an area of expected recovery in the second half on premium and AI-appliance demand growth.
In the automotive segment, development of lightweight composite materials for vehicle bodies and ESG-oriented eco-friendly materials is underway to address rising hybrid demand.
The PE business is counting on high-quality construction-material demand in developed markets such as Europe and North America, plus infrastructure build-out demand in emerging markets such as India, as growth drivers, with expanding use in premium packaging also cited.
However, these demand-side opportunities run counter to rising cost pressure from higher naphtha prices, and margin defense in the second half—given the lag between raw-material purchases and their flow into production—stands out as a key point to watch.
As industry-wide restructuring continues, a reshaped competitive landscape could also affect compounders' feedstock sourcing conditions over the medium term.
The stock tends to trade at a level below the company's net asset value, suggesting a notable gap between book asset value and the value the market currently assigns to the shares.
The fact that earnings have moved from loss to recovery since 2022 is cited as a factor that could narrow this gap, though the stock's small market capitalization also means limited trading liquidity should be considered.
The company has paid a cash dividend every year, but the dividend yield itself is not notably high relative to larger chemical peers in the sector.
During the earlier years of weaker performance, valuation multiples tended to stay compressed, and whether the recent earnings recovery changes that pattern is something to confirm through upcoming quarterly results.
Ultimately, how valuation is read may hinge on how much of the naphtha-driven cost pressure flows through to second-half results.
PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-08-23
The operating margin steadily improved from 1.9% in 2022 to 5.0% in 2025, while owners' net income grew from KRW 11.5 billion to KRW 33.1 billion over the same period. The trailing four-quarter net income sum of about KRW 32.2 billion also points to a continuing recovery. Quarter-to-quarter swings remain, however, so persistence needs further confirmation.
The PO segment is cited as a beneficiary of growing lightweight-material demand tied to EV and hybrid vehicle adoption, with first-quarter 2026 PO segment revenue up 3.9% year over year. Expanded European exports are also mentioned as offsetting softer demand in some markets. R&D is concentrated on lightweighting and flame-retardant technology.
Lotte Chemical, HD Hyundai Chemical, Yeochun NCC and SK Geo Centric are pursuing NCC facility consolidation and closures, raising the possibility of easing industry oversupply over the long run. Korea Ratings noted room for improvement from 2028 onward. However, new capacity plans exceeding these cuts also exist, limiting near-term effects.
Naphtha prices surged following the March 2026 Hormuz Strait blockade, reportedly up 93% from the start of the year as of May. Given the lag in raw-material flow-through, reverse-lag cost pressure could intensify in the second half.
The lower operating margin in the first quarter of 2026 compared with the prior quarter also suggests this pressure is already partly showing through.
Large-scale Chinese capacity expansion has left the domestic petrochemical sector in a state of structural oversupply, and Korea Ratings issued a negative 2026 industry credit outlook.
New capacity additions exceeding domestic restructuring efforts are expected to limit supply-demand improvement for now, which could also affect PP and PE feedstock prices and spreads.
As of the first quarter of 2026, PS segment revenue fell 5.2% year over year, and the construction-materials segment fell 15.0%. Growth in the PO segment is offsetting this, but divergence exists across business segments. Whether this pattern continues will depend on downstream industry conditions.
Key raw materials PP and PE track naphtha prices, which are heavily influenced by international oil prices and Middle East geopolitical risk. A recurrence of supply-chain disruption such as the 2026 Hormuz Strait blockade could sharply increase cost burdens. The export-heavy PE business is also exposed to exchange-rate fluctuations.
Continued global capacity expansion centered on China could keep spread pressure on commodity plastic materials. Domestic industry restructuring is underway, but new capacity plans exceeding these cuts limit near-term supply-demand improvement, which could affect sales margins in the PO and PS segments.
The debt ratio eased somewhat from 92.5% in 2022 to 87.1% in 2025 but remains elevated. As a small-cap stock, trading liquidity can be limited, and earnings sensitivity to cost and demand swings is relatively high. Ongoing monitoring of quarter-to-quarter margin volatility is warranted.
The third-quarter 2026 report is due to be filed, and it will be important to check how the reverse-lag effect from the naphtha price surge shows up in third-quarter margins.
This is when higher-cost naphtha is expected to fully flow into production, making it important to check the degree of cost pressure relative to PO and PS segment sales and how well spreads hold up.
Follow-up developments in NCC restructuring at Lotte Chemical, HD Hyundai Chemical, Yeochun NCC and SK Geo Centric could affect the industry's overall supply picture, warranting attention to related announcements.
It will be worth checking whether the seasonal pattern of fourth-quarter margins coming in below third-quarter levels, as seen in 2025, repeats, and whether the annual earnings recovery trend continues.
HDC Hyundai EP, centered on compounded materials for automotive and electronics applications, has seen operating margins and net income steadily recover since 2022.
The PO segment is cited as a beneficiary of EV and hybrid demand and lightweighting trends, while the PS and construction-materials segments have seen revenue declines, reflecting divergence across business lines.
Entering 2026, the naphtha price surge following the Hormuz Strait blockade has fed into industry-wide cost pressure, and the margin decline in the first quarter can be read as an early sign of this pressure showing through.
At the industry level, structural oversupply driven by China and domestic restructuring efforts are unfolding simultaneously, and near-term supply-demand improvement is viewed as unlikely.
Ultimately, the direction of future results will hinge on how much naphtha cost pressure flows through in the second half and how much the PO segment's structural growth offsets it. Investors should weigh upcoming quarterly results alongside the progress of industry restructuring before drawing conclusions. This report is for informational purposes only and does not constitute a buy or sell recommendation.
Report written 2026-09-05 · Data as of 2026-09-04
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