[Click e-Stock] "Kolon Industries, a Hidden Beneficiary of Surging AI Semiconductor Demand"

Expansion of the mPPO Market
and Anticipated Profit Rebound

Samsung Securities has identified Kolon Industries as a "hidden beneficiary of AI," focusing on the company’s growth potential amid expanding demand for artificial intelligence (AI) semiconductor materials. In particular, the mPPO (modified polyphenylene oxide) business has been highlighted as a key growth driver. While no investment rating or target price was provided, Samsung Securities projected a turnaround in Kolon Industries’ performance in 2026, citing improvements in the industrial materials and chemical divisions.

The main investment point for Kolon Industries is the expansion of its mPPO business, which produces an AI semiconductor material. mPPO is a resin material used in copper-clad laminates (CCL) and is applied to substrates for AI servers due to its low dielectric properties, which reduce communication loss compared to conventional epoxy. Kolon Industries has already secured customers in Northeast Asia, and the expansion of its Gimcheon Plant No. 2 is underway. When completed in the first half of 2026, sales are expected to double from the current 80 billion won. As demand increases, the possibility of additional investment is also being raised.

From a performance perspective, Kolon Industries is expected to return to profit growth for the first time in five years. Operating profit has declined from 252.7 billion won in 2021 to 108.9 billion won in 2025, but both the industrial materials and chemical divisions are expected to improve in 2026. The industrial materials division is anticipated to benefit from a recovery in tire cord profitability and reduced losses in aramid, while the chemical division’s outlook is supported by the expansion of mPPO capacity and improved supply-demand conditions for petroleum resins. Each of the chemical and industrial materials divisions is expected to account for approximately half of total profits, signaling strong potential for performance leverage going forward.

There is also discussion of a potential re-rating in terms of valuation. The increasing share of high-growth businesses centered on mPPO could lead not only to improved profitability in the chemical division, but also to the assignment of a growth premium. As of 2025, the operating profit margin of the chemical division is projected at 8.9%, which is higher than that of industrial materials. Furthermore, as the share of high value-added products increases, company-wide profitability is expected to improve, serving as a driver for higher valuation alongside profit growth.

Hyunryul Cho, an analyst at Samsung Securities, stated, "Entering an investment cycle due to the expansion of the mPPO market will lead to increased profits and an improved profit mix for the chemical division," adding, "There is a high likelihood that both profits and valuation will rise together."

This content was produced with the assistance of AI translation services.