[Click eStock] "E&Di, Catalyst This Year and Secondary Battery Precursors Next Year... Expecting Re-rating"

[Asia Economy Reporter Hyunseok Yoo] Meritz Securities analyzed on the 15th that E&Di's performance growth this year will be driven by catalysts, and next year, stock price re-rating is expected due to the production of secondary battery precursors. The investment opinion 'Buy' and the target price of 66,500 KRW were maintained.

Meritz Securities forecasted that E&Di's sales in the second quarter of this year will be 26.9 billion KRW, an increase of 11.8% compared to the same period last year. However, operating profit during the same period is expected to decrease by 37.2% to 3.7 billion KRW. Researcher Lee Sang-hyun explained, "The sales growth is due to the recovery of DPF supply volume delayed by the restructuring of the exhaust gas reduction business and the growth in catalyst sales for agricultural and construction machinery," adding, "The decrease in operating profit is due to the price reduction of DPF."

He predicted that the catalyst business will lead E&Di's performance growth this year. He said, "Catalyst segment sales are expected to grow 180.4% year-on-year to 30.7 billion KRW," and added, "Expansion of catalyst supply volume for off-road applications such as construction and agricultural machinery is expected due to catalyst certification and supply meeting emission regulations such as the US Tier 4 and Europe's STAGE-V standards." He further noted, "In the future, the company plans to enter the SCR catalyst (nitrogen oxide removal) business applied to power generation facilities and waste incineration facilities, as well as the reforming catalyst and main fuel cell catalyst business used in hydrogen production and utilization processes."

In particular, production of secondary battery precursors is expected to be in full swing next year. He said, "The production capacity of secondary battery precursors is being expanded from 1,000 tons at the end of last year to 4,000 tons by the end of this year," and added, "Full-scale mass production is scheduled to begin in February next year, and additional expansion is expected to meet the demand of major customers."

He emphasized, "The expected sales of precursors will grow from 72.1 billion KRW next year to 169.6 billion KRW in 2023, accounting for 40.9% and 59.3% of total sales respectively, marking the full-scale growth of secondary battery performance," and concluded, "We present a buy opinion anticipating product diversification in the catalyst business and entry into the hydrogen business, as well as the full-scale growth of secondary battery precursors in 2022."