by Lee Seonae
Published 05 Sep.2022 10:12(KST)
[Asia Economy Reporter Lee Seon-ae] On the 5th, E&Di's stock price showed an early morning upward trend. This is interpreted as due to expectations that 2023 will mark the first year of performance growth with the full-scale sales of secondary batteries.
Starting at an opening price of 28,850 KRW, E&Di's stock price surged to 29,450 KRW in the early session. As of 10:10 AM, the stock is trading at 28,450 KRW, up 1.79%. On this day, Kim Doohyun, a researcher at Hana Securities, stated, "The company's growth engine is sufficient due to the strong performance of its core catalytic materials, 100 billion KRW scale secondary battery precursor performance, and continuous demand increase from customers driven by the European Raw Materials Act (RMA) and capacity expansion," but also pointed out, "compared to the average price-earnings ratio (PER) of 35.3 times for domestic material companies, the company’s PER is 18.4 times, indicating that it has not fully received the secondary battery material multiple."
In the second quarter consolidated results, sales amounted to 17.3 billion KRW, down 33.0% year-on-year, and operating profit was 1.8 billion KRW, down 38.0%. The decline was due to poor catalytic system performance caused by the Ministry of Environment’s budget cuts. Contrary to concerns, performance is expected to increase in the second half. Since the results of Kiryeon ENC, acquired last year, were only recognized as 380 million KRW in the first half, full reflection is expected in the third quarter. Additionally, the catalytic material market is improving due to emission regulations, and actual catalytic supply to a leading domestic gas heating and cooling system (GHP) company began in July. Accordingly, expansion of sales proportion in catalytic materials will enable growth in the core business, and a structural improvement toward a secondary battery material company is deemed possible.
E&Di completed an annual 5,000-ton scale precursor capacity expansion in the first half of 2022 and is conducting trial operations in the second half. There is a possibility of sales related to the expansion in the fourth quarter, and the entire expanded facility is expected to be operational by January next year. Due to the nature of the equipment, once full-scale mass production begins, yield will approach 100%, and with the current precursor price at around 20,000 KRW/kg, approximately 100 billion KRW in sales can be generated from the secondary battery business. Additional expansions of over 20,000 tons are expected to proceed stepwise, and with recent expansions such as Yumicores’ new plant in Canada, forward demand remains continuous.
Meanwhile, if the battery supply chain is reorganized away from China due to the European Raw Materials Act, this is also expected to be beneficial. As the proportion of high-nickel increases, the need for small particle size precursors rises. E&Di is the only domestic company mass-producing below 5μm, and exclusive supply to Yumicores, the global number one European customer, is scheduled.
Researcher Kim emphasized, "This year’s sales are expected to increase by 10.3% to 85.4 billion KRW, and operating profit by 9.6% to 8.4 billion KRW," adding, "However, in 2023, sales and operating profit are expected to surge by 116.3% and 92.0%, respectively, to 184.7 billion KRW and 16.1 billion KRW."
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