Expectations High for Elecfoil Business
The author is an analyst of NH Investment & Securities. He can be reached at j.ko@nhqv.com. -- Ed.
Doosan Solus boasts strong top- and bottom-line growth potential. Its superior growth momentum, backed by its elecfoil plant in Europe, should begin to stand out from 2021.
Maintain positive view
We maintain a Buy rating and TP of W43,000 on Doosan Solus. Over the near term, the start of operations at the Hungarian elecfoil plant should boost the firm’s earnings, and over the long term, the company appears positioned to benefit from both OLED and rechargeable battery market expansion.
Looking at the OLED materials business, we predict that divisional earnings will continue to expand, thanks to its strong market dominance and diversified client base. The firm boasts a 43% share of the HTL market and a 17% share of the functional OLED materials market (as of 1H20).
The copper foil business should also book solid earnings growth thanks to strong demand for 5G network copper foil. Doosan Solus’s copper foil is supplied to telcos and telecom equipment players for the purpose of mitigating 5G signal loss. Meanwhile, the elecfoil business is to see full-fledged sales growth from 2021. Doosan Solus is the only company in the world with an elecfoil production plant in Europe (Hungary). With the competitive landscape for the European elecfoil market remaining favorable, we expect the firm’s market dominance to strengthen.
Expectations high for elecfoil business
The elecfoil business should generate meaningful earnings from 4Q20. From 2021, the business is predicted to book solid earnings growth backed by: 1) rising rechargeable battery demand in line with European xEV market growth; 2) greater investment at client companies; and 3) aggressive capacity expansion. The OP contribution from elecfoil and copper foil is set to grow from 56% in 2020, to 62% in 2021, and to 66% in 2022.