A Dominant Player in Rechargeable Battery Tape Market
The author is an analyst of NH Investment & Securities. He can be reached at neul.ha@nhqv.com. -- Ed.
Wielding a dominant position in the rechargeable battery tape market, Tapex is to enjoy earnings growth alongside rising battery shipments at its clients. With rechargeable battery safety becoming an increasingly important issue, Tapex’s competitiveness in the high-quality tape product market is to stand out. Accordingly, we view the application of a valuation at the level of rechargeable battery material makers as being justified.
Rechargeable battery materials player set to enjoy rapid growth
We initiate coverage on Tapex with a Buy rating and a SOTP-based TP of W110,000, derived by applying varying multiples by division. For the electronic materials division, we applied the average 2024F EV/EBITDA of 10.0x for rechargeable battery material makers. For Uniwrap and the consumer goods division, we applied average 2022E EV/EBITDAs of 5x and 5.5x, respectively. Our TP equates to a 2022E P/E of 19.5x (vs rechargeable battery materials makers’ average of 45.6x), offering upside potential of 62.7%.
Tapex produces tape products that are essential at rechargeable battery makers. Its cylindrical battery tape supply share is sized at 80% for the Korean market and 30% for the global market. Tapex’s rechargeable battery tape sales portion is set to rise from 42% in 2021 to 56% in 2023 and further to 65% in 2025. Given its dominant supply share among major global cell makers, the firm’s shares look notably underappreciated by the market. We view the application of a valuation at the level of rechargeable battery material makers as being justified.
Boasts portfolio that captures both growth and stability
After being incorporated as a subsidiary of Hansol Chemical, Tapex reorganized its business portfolio to focus upon growth potential and profitability. Having conducted restructuring of its electronic materials division and OEM conversion of its packing tape domain, Tapex now enjoys a higher rechargeable battery sales portion. Also positive, it has reduced the size of its OCA film business for LCD, and it has started developing OCA film for OLED. Its product portfolios also include kitchen goods, nitrile gloves, and eco-friendly products.
Moving ahead, both the Uniwrap division and the consumer goods division should display stable earnings. Steady cash flows generated by both are being used to expand production capacity at the rechargeable battery tape unit, Tapex’s major growth engine, setting the table for overall earnings growth. With the firm having established a business portfolio offering both earnings stability and growth potential, it is well situated to benefit from anticipated rapid growth of the rechargeable battery materials market.