[Clicke Stocks] "Vitzrocell, Frontline Industry Beyond COVID-19... Performance Normalization Expected"

[Asia Economy Reporter Park Jihwan] On the 21st, KB Securities evaluated that Bitsrocell's key downstream industries are emerging from the impact of COVID-19, raising expectations for performance normalization.

Bitsrocell is a manufacturer of lithium primary batteries. As the number one lithium primary battery company in Korea, it holds a dominant market position with about 80% domestic market share. Lithium primary batteries offer over 10 years of long life and can be used in high and low temperature environments. The main downstream industries include smart meters and military batteries for guided weapons power sources. Bitsrocell possesses technology covering all processes from design of core components to development, production, and finished product manufacturing. It has secured more than 250 global customers, with over 80% of sales generated from overseas markets including North America and India.

Researcher Lee Byunghwa of KB Securities stated, "Unlike B2C-focused alkaline batteries, this is a typical B2B business requiring high technology and capital. As downstream industries centered on energy and defense grow, we expect a performance improvement trend as the impact of COVID-19 subsides."

He added, "The smart meter business in North America, which accounts for about 60% of sales, is expected to recover to normal levels," emphasizing, "Lockdowns at major business sites due to the pandemic are being lifted, and projects with delayed installations are sequentially normalizing, so we anticipate a recovery in smart meter orders in the North American region starting from the second quarter."

Particularly, the recovery of defense sector performance and external growth factors are noteworthy. With the normalization of postponed shooting training and shooting range shutdowns caused by COVID-19, order volumes in major defense markets such as Korea and India are expected to recover. The mid- to long-term growth outlook is also positive. The agreement to end missile guidelines between Korea and the United States has lifted restrictions on maximum missile range and ballistic weight. Researcher Lee said, "We expect benefits from increased competitiveness of Korean missiles, including the Cheonmu unguided rocket project," and emphasized, "Defense projects such as next-generation military radios are also positive factors for defense performance."

However, risks such as overhang and lawsuits remain. Currently, there are 1,315,182 shares of outstanding convertible bonds from the first and second issuances, accounting for 6.1% of the total outstanding shares. The conversion price is around 15,207 KRW, and the conversion period is from December 4, 2022, to November 4, 2025. The convertible bond funds are planned to be used for operational funds and other purposes.

A lawsuit claiming damages totaling 26.5 billion KRW from the Korean government related to a military warehouse fire incident is also ongoing. This amount corresponds to 16.7% of Bitsrocell's total equity as of last year.