[Click eStock] "SKC, Relatively Undervalued in Secondary Battery... Increasing Copper Foil Production Capacity"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 3rd that it maintains a buy investment opinion and a target stock price of 170,000 KRW, forecasting performance improvement due to the expansion of the production plant of SK Nexilis, a copper foil company acquired by SKC last year.

SK Nexilis is SKC's copper foil manufacturer for electric vehicle batteries, and the expansion plan for its first overseas production plant in Malaysia has been raised from the initial 44,000 tons to 50,000 tons. This copper foil is being considered for entry into the US and European markets and is planned to be sold to the global No.1 US electric vehicle company. The production capacity is expected to exceed 190,000 tons by 2025. SK Nexilis's capital expenditures (CAPEX) from 2022 to 2024 are expected to be about 500 billion KRW, but considering its own performance improvement and SKC's profits, it is analyzed to be a manageable level through borrowing.

Han Sang-won, a researcher at Daishin Securities, said, "SKC's growth potential is increasing further, but the expected PER (price-earnings ratio) for this year is 37 times, which is relatively undervalued compared to the Korean secondary battery materials industry average (45 times)." He added, "Additional profit increase in the chemical sector is expected in the second quarter of this year (operating profit up 14% year-on-year), and even with a conservative assumption that copper foil profitability does not improve significantly, profit growth (operating profit up 13%) is possible due to sales growth."

SKC's operating profit in the first quarter of this year was 81.8 billion KRW, a 49% increase compared to the previous year, exceeding market expectations (74.9 billion KRW). The chemical division's profit surged 145% year-on-year,increasing more than expected and driving strong performance.Although copper foil decreased by 7% year-on-year, sales increased due to price hikes and higher sales volume.Profitability slightly declined due to proactive costs such as labor ahead of the commercialization of the new Jeongeup plants (5th and 6th plants) in the second half.