[Click eStock] "Iljin Materials, No Impact from Battery Internalization Strategy"

[Asia Economy Reporter Ji Yeon-jin] Shinhan Financial Investment forecasted on the 26th that despite significant concerns about the battery internalization strategies of automakers regarding Iljin Materials, there will be no change in the outlook due to the continued supply shortage of 'copper foil,' a core component of electric vehicle batteries.

Iljin Materials recorded sales of 132.6 billion KRW (+4.5% year-on-year) and an operating profit of 13.5 billion KRW (+580.1%) in the fourth quarter of last year. Although the operating margin (10.2%) was maintained, both sales and operating profit fell short of market expectations. Sales from the key growth driver, the Malaysian subsidiary (IMM), amounted to 24.3 billion KRW, missing the forecast. It is understood that factory access was restricted due to the Malaysian government's Movement Control Order (MOC). In the first quarter of this year, the MOC was conditionally eased, and normal operation of IMM is expected. Considering the deferred demand accumulated in the second half of last year, quarterly sales could be revised upward to 66.8 billion KRW (+164.6%).

The price of copper, which was 5.0 USD per kg (LME 3M basis) at the beginning of last year, surpassed 7 USD by the end of the year and is currently at 8 to 9 USD in the first quarter of this year. The price of copper foil for domestic export also rebounded from the second half of last year after a sluggish first half. Due to the pass-through of copper prices (2M~3M lagging), the price increase of copper foil is expected to continue in the first half of this year.

With the normalization of overseas subsidiaries' operating rates and product price increases, this year's performance is projected to be sales of 805.3 billion KRW (+50.0%) and operating profit of 95.1 billion KRW (+83.5%). Yongjin Jeong, Senior Researcher at Shinhan Financial Investment, stated, "Signals of copper foil shortage are overlapping, maintaining expectations for expanded capital expenditures (Capex) and accelerated production capacity expansion," adding, "There is a high possibility that the mid- to long-term roadmap will be revised upward."