Expanding to dry rooms

The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com -- Ed.

Following the semicon clean room and solar PV module businesses, the rechargeable battery dry room business is predicted to post solid growth. Demand for dry rooms for battery manufacturing and production of materials such as electrolytes and separators is set to increase.

Expanding from clean rooms and solar PV modules to dry rooms

Shinsung E&G has a high market share in the fan filter unit (equipment with built-in fans and filters installed in the ceilings of clean rooms for semicon and display manufacturing) market. As even the tiniest amount of dust in clean rooms can lead to defects and low production yield, having an ample track record is crucial.

The company is expected to achieve high growth through sales of rechargeable battery dry rooms. Dry rooms are spaces with relative humidity of under 10%, and a non-dew point temperature of -10°C or less. Demand for dry rooms is set to grow on expanding rechargeable battery-related investment.

Dry rooms are necessary not only for battery manufacturing, but also for production of materials such as copper foil, electrolytes, and separators. Moisture reduces production yield as it reacts with lithium and electrolytes. Dry rooms are especially important during assembly processes, and also during electrolyte injection processes.

Dry room orders increasing; sound earnings expected this year

As of end-2022, the order backlog portion for dry rooms stood at around 30%. Currently, Sinsung E&G and company A are the only two listed firms that can supply dry rooms. As rechargeable battery production facilities are increasing in scale, it is becoming even more challenging for small players to enter the market. Shinsung E&G aims to grow its share of the dry room market from 30% to 60% (in line with its clean room market share).

We forecast 2023 sales of W811.2bn (+22.1% y-y) and OP of W43.6bn (+102.7% y-y). The firm’s business expansion and rising market share are attractive investment points.