Shipment of EV Battery Materials to Begin in 2022
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Shipment of EV battery materials to begin in 2022
We maintain BUY and our TP of KRW350,000 on Hansol Chemical. During the past three days, concerns over the growth potential of the EV battery material business pushed the company’s stock down 8.1%, but we see this as an overreaction given that the company will begin full-fledged shipments of materials to global battery manufacturers and expand its product lineup next year. For 2023, Hansol Chemical will begin mass production of electrolytes for solid-state batteries in joint efforts with global automakers. As such, we see the OP proportion of EV battery materials jumping from 10% in 2021 to 25-30% in 2023; the main revenue generators are to be binders in 2021, silicon anode materials in 2022 and solid-state electrolytes in 2023.
2022 quarterly OP may hover around KRW70-80bn
We believe there is potential for quarterly avg. OP to catapult from KRW55.6bn in 2021 (2021E OP of KRW222.2bn) to KRW70-80bn in 2022 (vs. market consensus of KRW62.3bn, KB estimate of KRW67.4bn; 2022E OP of KRW280-300bn). The company is virtually the sole supplier of EV battery materials, QD materials and semiconductor materials (e.g., precursor, hydrogen peroxide) to key Samsung Group companies (e.g., Samsung Electronics, Samsung SDI, Samsung Display); business with Samsung, along with new medical material (NBL) business, should provide a significant top-line boost.
Quarterly growth in OP to continue throughout the year, marking the first time since 2014
We expect quarterly OP to continue to grow until 4Q21 (KRW52.2bn in 1Q21; KRW53.7bn in 2Q21; KRW57.8bn in 3Q21; KRW58.5bn in 4Q21), which would mark the first time since 2014 for OP to improve every quarter of a year. When disregarding year-end performance bonus payments, we estimate 4Q21 OP of KRW80bn, increasing the likelihood of avg. 2022 quarterly OP reaching KRW70-80bn. EV material stocks are trading at an avg. 53.1x 2022E P/E, implying a 305% premium against Hansol Chemical’s 13.1x; we believe the company is the most undervalued stock among EV material companies and that attention should be turned toward the potential of an increase in valuation.