[Featured Stock] Dong-A Hwasung Benefits from Hydrogen Economy Promotion in Green New Deal and Electric Vehicle Growth

[Asia Economy Reporter Hyungsoo Park] Donga Hwasung's stock price is on the rise. Amid expectations that the electric vehicle market will grow rapidly, secondary battery-related stocks have been showing strong performance day after day, and Donga Hwasung also appears to be attracting attention.

As of 1:09 PM on the 25th, Donga Hwasung is trading at 5,180 KRW, up 2.57% from the previous trading day.

Concerns about a global economic recession are growing due to the spread of the novel coronavirus infection (COVID-19). Governments of major countries are introducing economic stimulus measures. The European Union (EU), which is promoting the Green New Deal, recently announced stimulus measures for the electric vehicle sector and plans to finalize detailed measures next month. The stimulus package is known to include the establishment of an integrated clean car purchase agency budget of 20 billion euros (27 trillion KRW, over 2 years), support of up to 60 billion euros (81 trillion KRW) for electric vehicle production increase, and exemption of value-added tax on electric vehicles.

The recent sharp rise in secondary battery company stock prices is also related to expectations for the growth of the electric vehicle market. According to market research firm SNE Research, the global electric vehicle battery usage, which was 326 gigawatt-hours (GWh) last year, is expected to grow to 434 GWh this year and 2,985 GWh by 2030. IHS Markit forecasted that the electric vehicle battery market size will reach 182 trillion KRW by 2025. This is a larger market than the memory semiconductor market, which is expected to be 169 trillion KRW in 2025.

Donga Hwasung holds an absolute market advantage in the automotive and home appliance rubber parts market based on its top-level domestic rubber compounding technology and structural design. It has developed battery pack gaskets for electric vehicles and currently supplies them to US GM, China’s First Automobile Works (FAW), China’s Great Wall Motors, Hyundai Motor Company, and others. The demand for eco-friendly rubber products such as intake and exhaust hoses for hydrogen vehicles and integrated gaskets for hydrogen fuel cell stack separators is also considered a positive factor for improving Donga Hwasung’s performance.

Expectations for benefits from the Green New Deal policy, which President Moon Jae-in has positioned alongside the Digital New Deal as the two pillars of the ‘Korean New Deal,’ are also growing. There is speculation that Green New Deal-related policies will move toward an ‘energy transition’ trend encompassing the entire energy sector. The government is pursuing measures to increase the share of renewable energy in the power generation portfolio and improve electricity consumption efficiency. Additionally, the hydrogen economy promotion policy plans to support domestic companies’ entry into the global market.

Donga Hwasung’s affiliate, Donga Fuel Cell, is a hydrogen fuel cell research and development company. Donga Fuel Cell plans to launch a 5kW-class high-temperature polymer fuel cell product within this year and subsequently expand mass production facilities and conduct additional technology transfers for overseas market entry.