New Momentum in Rechargeable Battery Materials
The author is an analyst of NH Investment & Securities. He can be reached at ys.hwang@nhqv.com. -- Ed.
Hansol Chem logged record-high 1Q20 earnings, thanks to shipment growth for semiconductor and display materials. We expect display materials-related earnings to see a temporary slowdown in 2Q20. However, the firm should enjoy strong rechargeable battery materials sales growth from 2H20.
1Q20 review: Reports record-high quarterly OP
Hansol Chemical (Hansol Chem) recorded 1Q20 OP of W35.2bn (+24.6% y-y, +103.8% q-q), a record-high level, backed by rising shipments of semicon materials, including hydrogen peroxide and precursor, and growing shipments of QD materials on increasing demand for restocking. Of note, pre-tax profit surpassed expectations, as profit from the sale of subsidiary Hansol CNP (W10bn) was reflected in non-operating income.
Hansol Chem’s main business, H2O2 for semiconductors, has seen uptrending shipments since 2H19. While 1Q20 shipment growth was partially attributable to the procurement of inventory reserves at clients, even if excluding such effects, shipment expansion was observed. Thanks to the plunge in oil prices, H2 production cost should drop in 2Q20, leading to overall cost reduction. We believe that every decline of US$10/bbl in the price of oil translates into an additional W4bn in annual OP for Hansol Chem.
Enjoying solid semicon materials earnings and new momentum in rechargeable battery materials
Hansol Chem is expected to record 2Q20 OP of W30.9bn (-0.8% y-y, -12.3% q-q), showing a temporary OP decrease. Due to Covid-19, the shipment of display materials, including QD materials, is likely to fall in 2Q20. Although semicon materials shipments have been sustaining growth thus far, shipment numbers could change from June depending on potential lockdown extensions in the US and Europe.
We note that Hansol Chem has begun delivery of anode binder, a material for rechargeable batteries, to clients such as Samsung SDI and SK Innovation. We view the domestic supply of anode binder as meaningful, as supply of the material was previously monopolized by Japanese firms, and expect shipments to begin rising in earnest from 2H20. While related annual sales are anticipated to reach W13bn in 2020, there is a high possibility for further sales and OP growth if EV market expansion accelerates and Hansol Chem is able to acquire new clients and orders in China.