[Click eStock] "Iljin Materials Shows Clear Profitability Improvement in Malaysian Subsidiary"

Factory Operations Fully Resume as COVID-19 Travel Restrictions Lift
Hana Financial Investment Raises Iljin Materials Target Price from 88,000 KRW to 110,000 KRW

[Asia Economy Reporter Gong Byung-sun] Iljin Materials is showing clear growth in Malaysia. This is because the operation of the factory in the Malaysia region has been fully activated as the movement restriction orders due to COVID-19 were lifted. The expansion of demand from major clients is expected to lead to a trickle-down effect.

On the 20th, Hana Financial Investment maintained its investment opinion of 'Buy' for Iljin Materials. The target price was raised from the previous 88,000 KRW to 110,000 KRW. The closing price on the previous day was 76,700 KRW.

The improvement in profitability of the Malaysian subsidiary led to the upward revision of the target price. Despite the growth of the electric vehicle market last year, the quarterly sales of the battery division remained in the mid-70 billion KRW range due to the movement restriction orders in Malaysia. However, with the lifting of these restrictions, the second production line in Malaysia began full operation from early this year. As a result, Iljin Materials' battery division sales for the first and second quarters of this year increased to 90 billion KRW and 101.2 billion KRW, respectively.

Although the net profit margin in the second quarter fell by 9 percentage points from the previous quarter to 17%, it is expected that profitability will not be impaired. Kim Hyun-soo, a researcher at Hana Financial Investment, explained, "The rise in copper prices led to an increase in selling prices, resulting in higher sales, but since profits under existing contracts are fixed in absolute terms, the net profit margin declined. Even if profit margin decreases occur with future copper price increases, they will not affect the expected profit scale."

Going forward, the expansion of demand from major clients and the trickle-down effect are also expected to increase. The shipments of electric vehicle batteries from major clients such as Samsung SDI and LGES are increasing daily. Accordingly, Hana Financial Investment projected Iljin Materials' sales this year to increase by 28% year-on-year to 682.9 billion KRW, and next year to increase by 43% year-on-year to 974.2 billion KRW. Operating profits for this year and next year are expected to reach 83.8 billion KRW and 123.5 billion KRW, respectively, representing increases of 66% and 47% compared to the previous year.