3Q17e preview: We estimate that the Korea BTX makers we cover will report aggregatesales of KRW89bn and OP of KRW50bn in 3Q17e. Sales and OP should show solid 35%and 40% y-o-y growth but will likely miss revised up consensus slightly by c5%. Thisshould mainly be due to 1) for Hugel, weaker than expected BTX sales impacted bydomestic BTX price cut at Medy-tox. 2) For Medy-tox, overseas BTX sales ramp-up alongwith the start-up of its Osong no. 3 plant, seems to be taking longer than expected.    Short-term sentiment may weaken: We think the relatively soft 3Q17e may weakensector sentiment. Medy-tox and Hugel sales have not been below consensus for the past6 quarters; stronger than expected growth has been one of the key share price drivers.    Thus, while the miss may not be huge, it may be a disappointment to the market. Themarket may also start to raise more concerns on intensifying competition on the back ofdomestic competitors’ capacity expansion and possibility of BTX ASP cut.    But long-term structural growth story is unchanged. Despite short-term headwinds,we remain positive on the Korea BTX makers. Along with strong demand for BTXglobally, Medy-tox and Hugel should be able to expand their overseas market sharebased on their good quality but cheap price strategy. Both also have completed their BTXcapacity expansion thus, we expect to see on-going ramp-up of overseas sales. Of note,Korea’s BTX export is up 133% as of y-t-d September. Moreover, Medy-tox and Hugelare capable of generating further growth via penetrating into the key global marketsincluding US, EU and China. We think any newsflow related to clinical trial process inthese markets could be a catalyst for the companies as it would improve marketconfidence in their long-term structural growth.    Cut TP for Medy-tox, unchanged for Hugel; both Buy. We cut our TP for Medy-tox toKRW670,000 from KRW710,000 as we lower 2017-18e sales and OP by c3-6% factoringin slower than expected BTX exports. For Hugel, we lower our 2017-18e sales by c3% onthe back of weaker than expected domestic BTX sales. However, we expect the higherBTX exports portion to lead to better margins, thus our OP remains unchanged whichleads to our unchanged KRW700,000 TP.

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