Hwaseung Group, South Korea’s midsize conglomerate owning automotive parts, shoes and fine chemical manufacturing units that together generate annual sales of around 4 trillion won ($3.46 billion), has seen steady growth in earnings and share prices of its unit thanks to an ownership structure allowing functional management by each affiliate. Earnings outlook for its units also looks promising, market analysts said.

According to the investment banking industry Thursday, Hwaseung Group’s de facto holding firm Hwaseung R&A Co., which manufactures automotive and industrial rubber parts, has raked in 98.1 billion won in operating profit last year and is expected to post more than 100 billion won in operating income this year.

Backed by the steady improvement in its earnings, the firms’ shares more than doubled to 35,000 won on Thursday from the 15,000 won range in early 2014. Its stocks ended Friday at 35,150 won, up 0.43 percent from the previous session.

Its price to earnings ratio (PER) at the end of last year was estimated at 4, leaving more room for growth in its stock price, said Song Seon-jae, an analyst, at Hana Financial Investment Co adding “its debt ratio, currently at 300 percent, is expected to gradually go down as its investment in overseas facilities is nearing the end.”

Earnings of Hwaseung Industries Co. whose 19.38 percent stake is held by Hwaseung R&A, have grown more rapidly with its operating profit jumping from 14.7 billion won in 2014 to 78.1 billion won (estimate) last year, according to local brokerage houses.

Market analysts expected the firm to earn more than 100 billion won in operating profit this year. The company that manufactures various plastic film products such as biaxially oriented polypropylene (BOPP), breathable and polyester films is also an original equipment manufacturer (OEM) of shoes for global suppliers such as Adidas AG.

The firm’s stock price has grown tenfold from 1,000 won in 2014 to 10,500 won in Thursday’s closing. Its stocks closed Friday at 10,450 won, down 0.48 percent from the previous session.

The company’s earnings are expected to grow further helped by robust performance of its shoes OEM business, Cho Hyun-mok, an analyst at Shinhan Financial Investment Co. said, adding that its PER, which is estimated at 9, indicated more room for increase in stock price.

Hwaseung Group companies’ stellar performance is credited to simple corporate ownership structure, noted market analysts. With Hwaseung R&A at the top, other Hwaseung affiliates are positioned in a vertical structure that has allowed clear and functional management by each unit, resulting in strong earnings in each unit.

The group started out as a small shoemaker named Dongyang Rubber Industry in 1953 in the country’s southern port city Busan.

By Hong Jang-won

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