SiOx Capacity to Reach 10,000 Tons by End-2024
The author is an analyst of NH Investment & Securities. He can be reached at minwoo.ju@nhqv.com. -- Ed.
With DAEJOO having moved forward its SiOx production plans, we upwardly adjust our 2024 earnings projections. Given a high possibility of additional new capacity, SiOx capacity expectations need to be hiked.
Raise TP by 16% to W140,000
Maintaining a Buy rating, we raise our TP on DAEJOO by 16% from W120,000 to W140,000. We upwardly adjust 2024 sales and OP estimates by 7% and 8%, respectively, now believing that the company’s silicon oxide (SiOx) capacity will reach 10,000 tons by end-2024 (rather than end-2025). Our target multiple of 26x represents a 30% discount to the four-year average of POSCO Chemical, which has a similar sales structure. In addition to cathode and anode, POSCO Chemical is a comprehensive rechargeable battery materials player that is preparing to advance into upstream arenas (including lithium and precursors), so a certain discount looks warranted.
We trim down our 2023 earnings forecasts to take into account mass production delays (2023 → 2024) at overseas battery maker clients.
Growing faster and larger
DAEJOO should post consolidated 4Q21 sales of W48.9bn (+24.3% y-y) and OP of W2.9bn (+109.7% y-y). Following 3Q21, in 4Q21, the firm’s phosphor (PIG) and SiOx businesses, which are leading the automobile market, were partially affected by a decrease in utilization rate due to finished vehicle production disruptions. This situation will likely continue until 1Q22, thereafter improving gradually from 2Q22.
Recently, battery makers, including EV makers, have been beefing up their production plans. In line, we now expect DAEJOO’s SiOx capacity to increase to 10,000 tons by end-2024 (rather than by end-2025). Accordingly, we upwardly adjust our 2024 OP estimate by about 8%.
Moreover, battery investment at Ultium Cells (LG Energy Solution-GM JV) will likely be expanded, in turn benefiting DAEJOO (which will supply SiOx). In addition to Ultium Cells’ plants #1 & 2, which have already both been confirmed, there is a high possibility that a third plant (40GWh estimated) will be added, and supply to Honda (40GWh) is also under discussion. If such a schedule is finalized, the SiOx capacity estimates for DAEJOO after 2025 (estimated 20,000 tons by end-2026) are highly likely to be revised upwards.