[Click eStock] The Most Undervalued Secondary Battery Material 'Daehan Yuhwa' Must Rise Over 90%

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 20th that it maintains its investment opinion of 'Buy' and target price of '400,000 KRW' for Daehan Yuhwa.

Hansangwon, a researcher at Daishin Securities, stated, "The target price was calculated by applying a price-to-book ratio (PBR) of 1.1 times to the 12-month forward estimated book value per share (BPS), reflecting a premium for the high growth potential of the secondary battery separator material (UWP; global No.1). Currently, the stock price level corresponds to a 12-month forward price-to-earnings ratio (PER) of only 6.3 times, making it the most undervalued secondary battery material company. The appropriate PER is 12.1 times, which implies an upside potential of 93% in the stock price."

The appropriate PER was calculated as a weighted average applying a PER of 43 times for UWPE (50% discount compared to SKIET’s 12MF PER of 85 times and the average for Korea’s secondary battery material sector) and 4 times for existing general-purpose products (with UWPE’s profit contribution estimated at about 20%).

UWPE is a product expected to grow at an annual rate of over 40% due to the high growth of electric vehicles and secondary batteries, with sales projected to surge from approximately 100 billion KRW in 2020 to 290 billion KRW in 2024. As it is a relatively high-profit product, the improvement in product mix is expected to generate effects that allow overall profit growth to continue regardless of fluctuations in the chemical market. The spread, which has been declining since April, is judged to have completed its short-term adjustment phase, and a market rebound driven by demand improvement is expected in the third quarter.

Meanwhile, operating profit for the second quarter is expected to record 82.8 billion KRW, a 4.4% decrease from the previous quarter, slightly below market expectations of 85.5 billion KRW. Although the spread showed a downward trend in the second quarter, the quarterly average actually increased slightly compared to the previous quarter (1Q 779 USD/ton vs. 2Q 787 USD/ton, Spot basis).