The Only Battery Copper Foil Producer in Europe
The authors are analysts of Shinhan Investment Corp. They can be reached at minseo.cho@shinhan.com and changmin.yoon86@shinhan.com, respectively. -- Ed.
Acquisition of CFL paved the way into the copper foil market
Doosan Solus entered into the copper foil market with the acquisition of CFL in 2014. CFL is the only copper foil producer in Europe and has been in the business for 60 years. Major clients are network equipment makers (US, Europe, China, etc.), FCCL (flexible copper clad laminate), and PCB (printed circuit board) companies. Key competitors are Furukawa (Japan) and KCF Technologies (Korea). The copper foil plant in Luxembourg is estimated to have been running at full capacity since 2H19 to meet strong demand for high-end copper foil used in 5G network boards (high-end products account for 70% of total copper foil sales). The company plans to increase copper foil capacity from 10,000 tons in 2019 to 13,000 tons in 2020 and 20,000 tons in 2021.
Positive outlook for battery copper foil in terms of technology, clients and capacity addition
The expansion of the Hungarian plant, which started out in 2019, should bring battery copper foil capacity up from 10,000 tons in 2020 to 25,000 tons in 2022 and 50,000 tons in 2024-2025. With initial production lines being set up, sales from mass production should flow in from 3Q20. Under strong commitment to establishing a local battery value chain, the EU offers various incentives and tax benefits for businesses building facilities in the region. Doosan Solus announced on April 22 that it will extend debt guarantee to Doosan Energy Solution (battery copper foil sub-subsidiary in Hungary) to receive incentives from the Hungarian government. Additional funds are likely to be raised locally.
Doosan Solus has secured two long-term supply contracts (about 8,000 tons). As the only battery copper foil producer in Europe, the company has a good chance of winning more supply deals. The two contracts already signed, which cover products manufactured in Luxembourg, prove the company’s cutting-edge technology. The Hungarian plant produces a few items in large quantities, thus creating economies of scale upon mass production.
2020 outlook: Sales +25.7% YoY, OP +9.2% YoY
For 2020, we forecast sales at KRW330.7bn (+25.7%YoY) and operating profit at KRW41.7bn (+9.2%YoY, operating margin of12.6%). Earnings growth should be driven by: 1) new sales from battery copper foil; 2) strong demand for copper foil used in network applications (Luxembourg plant continues to run at full capacity); and 3) solid demand for OLED materials. The company is expected to deliver mid/long-term growth based on a healthy business portfolio composed of cash cows (copper foil, OLED materials) and a new growth driver (battery copper foil).