A Pair Trade on Hyosung Corp (Long) And Hyosung Heavy Industries (Short)

• In this insight, I discuss a pair trade between Hyosung Corporation (004800 KS) (long) and Hyosung Heavy Industries Corp (298040 KS) (short).

• My NAV analysis of Hyosung Corp is implied market cap of 7.5 trillion won or target price of 448,449 won per share, which represents a 72% upside from current levels

• Although HHI has performed much better than Hyosung Corp in the past one year, the latter has outperformed the former in the past one month.

Source: Hyosung Corp

Pair Trade Idea

At current prices, I like the risk-reward of long Hyosung Corporation (004800 KS) and short Hyosung Heavy Industries Corp (298040 KS) (HHI). Although HHI has performed much better than Hyosung Corp in the past one year, the latter has outperformed the former in the past one month. NAV of Hyosung Corp is also attractive. On the other hand, despite higher new orders and improving sales and profits at HHI, valuations have risen to lofty levels.