Hannong Chemicals: Profits Recovering From a Low Base, While the Model Estimate Sits Far Below the Share Price

Thesis

The data supports an earnings recovery. Trailing operating income of ₩12.5B compares with ₩3.6B in 2025, and trailing net income of ₩9.3B compares with ₩3.9B. ROE improved to 5.4% from 2.3%.

The data does not show that the recovery is durable. Revenue has swung between ₩212.4B and ₩268.8B over five years, and operating margin has ranged from -1.1% to 7.3%. Trailing free cash flow is -₩11.4B, and borrowings of ₩43.3B are well above cash of ₩10.3B.

The shares trade at 21.3 times earnings and 1.1 times book value. These are modest against the price swings of the past year, but the earnings base is small, so the multiple can move sharply. No news headlines are available in the data.

Business overview

Hannong Chemicals is listed on KOSPI and classified in the cosmetics sector. It was founded in 1976 and listed in 2003, with 15,637,042 shares outstanding. Market capitalization is about ₩199.1B, small next to the listed peers shown, which range from ₩2.9T to ₩10.7T. The company has two co-CEOs, 김응상 and 경상호. Revenue was ₩268.8B in 2021 and ₩214.5B in 2025, with a trailing figure of ₩230.8B as of H1 2026.

Financial analysis

These figures come from filed financial statements. Trailing revenue as of H1 2026 was ₩230.8B, operating income ₩12.5B (5.4% margin) and net income ₩9.3B (4.1% margin). Annual revenue growth was 16.5% in 2024 and -13.3% in 2025. Operating margin was 7.3% in 2021, 1.9% in 2022, -1.1% in 2023, 2.5% in 2024 and 1.7% in 2025.

Net income in 2023 (₩12.4B) exceeded operating income, which was a loss of ₩2.4B, so non-operating items mattered that year. The data does not explain them.

Liabilities to equity stand at 46.9%. Borrowings are ₩43.3B against ₩10.3B of cash. Free cash flow is -₩11.4B on a trailing basis. A filing in May 2026 covered new facility investment, and one in July 2026 covered a loan extension.

Valuation

The current P/E is 21.3, down from 59.9 at the end of 2025 and 46.6 at the end of 2024 as earnings recovered. It is above the 12.9 to 19.9 seen at the end of 2021 to 2023. P/B is 1.1 versus 1.3 at the end of 2025 and a range of 1.0 to 1.7 over five years. Other multiples are P/S 0.9, EV/EBITDA 10.1 and a dividend yield of 0.3%.

Among peers, P/E is 15.6 to 26.3 for those with a figure (LG H&H has none). P/B ranges from 0.7 to 16.4, which is very wide.

The valuation model is a 5-year discounted cash flow at a 7.4% rate. It gives a base estimate of ₩1,937 per share, with a bear case of ₩0 and a bull case of ₩7,309. All three are below the ₩12,730 close. This is a model estimate based on the assumptions shown, not a target. The gap largely reflects thin and uneven cash flow in the inputs.

Catalysts

• The next quarterly filing will show whether the H1 2026 margin improvement continues.
• The facility investment filing from May 2026 may affect capacity and future cash needs, though the data gives no details.
• The loan extension decision in July 2026 bears on how the company manages its ₩43.3B of borrowings.
• Foreign ownership fell to 3.3% from 4.0% sixty days ago, and the 20-day flows show foreign net selling of about ₩1.9B against retail net buying of about ₩1.6B.

Risks

• Margins have been volatile, including an operating loss in 2023, so the recent recovery may not hold.
• Trailing free cash flow is negative at -₩11.4B while borrowings exceed cash by about ₩33.1B.
• The model's base estimate of ₩1,937 is far below the current price, which signals sensitivity to cash flow assumptions.
• The shares fell 16.6% over one year and trade 56.8% below the 52-week high of ₩29,450, showing large price swings.
• Revenue fell in three of the last four years shown, with growth of -10.9%, -11.3% and -13.3%, and rose 16.5% in 2024.

Closing view

The filings show a clear improvement in trailing profit and returns, but from a very low base and with negative free cash flow and meaningful borrowings. The market multiples are moderate, yet the model estimate sits well below the share price. The evidence is mixed: earnings momentum is visible, but its persistence and cash conversion are not yet shown in the data.

Model estimate of fair value

Bear

₩0

-100%

Base

₩1,937

-84%

Bull

₩7,309

-41%

Model estimate based on the assumptions shown. Not a price target and not a buy or sell signal.

Base case of the 5-year discounted cash flow model on the stock's Valuation tab (statements TTM to H1 2026; discount rate 7.4%). Bear and Bull move the main assumptions by fixed steps. See and change the assumptions

Filings and data used

• Half-year report (Jun 2026)Aug 14, 2026
• Decision on Loan ExtensionJul 28, 2026
• [Corrected] New Facility Investment, etc.May 29, 2026
• Disclosure of Corporate Governance ReportMay 28, 2026
• Quarterly report (Mar 2026)May 14, 2026
• Annual general meeting resultsMar 27, 2026
• Report on Appointment, Dismissal, or Mid-Term Resignation of Independent DirectorsMar 27, 2026
• Audit report submittedMar 19, 2026
• Annual report (Dec 2025)Mar 19, 2026
• Change in largest shareholder's holdingsMar 17, 2026
• 5%+ holding reportMar 17, 2026
• Insider shareholding reportMar 17, 2026
• Daily prices up to 2026-10-23
• Financial statements, trailing 12 months as of H1 2026
• Our fair value model, statements as of TTM to H1 2026

Report history

1. Oct 25, 2026InitiationStart of coverage (reader request)Hannong Chemicals: Profits Recovering From a Low Base, While the Model Estimate Sits Far Below the Share Price