Growing Electric Vehicle Market... Rising Expectations for Secondary Battery Stocks

"Forecast to Show 3rd Rally Next Year"

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[Asia Economy Reporter Geum Bo-ryeong] As the electric vehicle market is expected to grow, expectations for secondary battery-related stocks are increasing.

According to Hana Financial Investment on the 3rd, the total export value of secondary batteries, including lithium-ion batteries, lithium polymer batteries, and lead-acid batteries, increased by 20% compared to the previous year. Thanks to the recovery in global electric vehicle and smartphone sales, lithium-ion batteries and lithium polymer batteries showed strong export performance. In particular, the export value of lithium-ion batteries, mainly used in electric vehicle batteries, increased by 29% compared to the previous year.

The electric vehicle market is expected to grow further. Kyobo Securities estimated next year's electric vehicle sales volume at 3.12 million units, which is a 3% increase compared to this year. The penetration rate corresponds to 3.8%. In addition, the Biden administration's eco-friendly policies in the U.S., continued stringent policies in Europe, and China's extension of subsidies and support policies are expected to contribute. Furthermore, as Volkswagen and Hyundai Motor Company launch electric vehicles in the market previously led by Tesla, the industry is likely to expand.

The fact that the electric vehicle market is attracting attention can also be confirmed by stock prices. Tesla's stock price rose about 38.61% in about three weeks, from $410.36 on the 10th of last month to $568.82 yesterday.

Secondary battery-related stocks have experienced two rallies so far. From 2017 to 2018, the first rally was driven by Tesla Model 3 sales and rising raw material prices, leading to performance growth. Early this year, a positive trend was detected due to the Tesla effect, but after the economic downturn caused by the COVID-19 shock, a sharp 'V'-shaped rebound led to the second rally. Choi Bo-young, a researcher at Kyobo Securities, said, "Although there is a continuous burden of overvaluation, the industry is still in the late introduction stage, and there is no doubt about the industry's growth and high valuation. Next year, the secondary battery sector is expected to show a third rally amid market participants' interest due to the increase in electric vehicle sales and corporate performance growth."

However, selective approaches are needed even among secondary battery-related stocks. Kim Hyun-soo, a researcher at Hana Financial Investment, recommended, "For material stocks, selective approaches are advised for companies whose sales and profit growth rates exceed the overall battery market growth rate due to market share increase or margin improvement." He added, "The three cathode material companies (POSCO Chemical, EcoPro BM, L&F), Doosan Solus for copper foil, and Dongwha Enterprise for electrolyte meet the above criteria."