[Click eStock] "Sungil Hightech, 3Q Results Disappointing but Momentum Expected"

On the 17th, Korea Investment & Securities maintained a buy rating and a target price of 180,000 KRW for Sungil Hightech, stating that its operating profit for the second quarter of this year met consensus estimates and future momentum is expected.

In the second quarter, Sungil Hightech recorded sales of 63.5 billion KRW, down 14.2% year-on-year, and operating profit of 7.9 billion KRW, down 56.6%. Compared to Korea Investment & Securities’ estimates, sales fell short by 11.1%, but operating profit was in line.

Researcher Cho Cheol-hee of Korea Investment & Securities said, "Sales were lower than initially expected due to a larger-than-anticipated decline in major mineral prices and a decrease in lithium sales compared to the previous quarter. Although the main product, lithium carbonate, was supplied without major issues, sales of lithium phosphate, which had been unusually high in the first quarter, significantly decreased in the second quarter. However, profitability was defended through effective raw material procurement policies despite the drop in mineral prices."

Sungil Hightech’s estimated third-quarter performance is sales of 65.9 billion KRW and operating profit of 7.2 billion KRW. Sales are expected to increase slightly compared to the second quarter, but the operating profit margin is projected to decrease by 1.5 percentage points.

Researcher Cho explained, "Inventory accumulation by some customers who delayed purchases in the second quarter is expected to resume in the third quarter, but lithium prices continued to decline in July and August, likely worsening profitability somewhat. Since mineral prices are falling and there is no additional production capacity this year, performance momentum is expected to be absent until the end of the year."

He added, "However, from 2024, with the completion of the first phase of the third plant, sales are expected to reach 447.4 billion KRW and operating profit 67.1 billion KRW. From 2024, momentum is also expected from various joint ventures (JVs) with battery and cathode material companies for entry into the U.S. market."

This content was produced with the assistance of AI translation services.