[Click eStock] "Iljin Materials to Maintain High Profitability in the Second Half"

Growth of Malaysian Subsidiary IMM Expected from Second Half
Shinhan Investment Corp. "Maintains Iljin Materials Target Price at 95,000 Won"

[Asia Economy Reporter Gong Byung-sun] Iljin Materials' Malaysian subsidiary IMM, which suffered from lockdown measures due to COVID-19, is expected to show growth from the second half of the year. Although volatility in secondary battery stocks may increase depending on external factors, Iljin Materials is anticipated to maintain high profitability in the second half as well.

On the 6th, Shinhan Financial Investment maintained its 'Buy' rating and target price of 95,000 KRW for Iljin Materials. The closing price as of the 3rd was 74,000 KRW.

The unstable external conditions seem to have been reflected in the investment opinion and target price. Since the operation of IMM's Line 1, Iljin Materials' Malaysian subsidiary, in Q2 2019, demand for copper foil for electric vehicles surged rapidly, raising expectations for IMM's production capacity expansion and sales growth. However, actual sales in Q1 this year were only 138 billion KRW, a 0.4% increase compared to the same period last year. This was due to the poor performance of construction subsidiaries and lockdown measures in Malaysia caused by COVID-19.

IMM's Line 2 was also completed and started operation last year but was only recognized as an asset in May this year. Operating activities during the 5 to 6 months were not recognized as sales and will be offset against future depreciation expenses. According to Shinhan Financial Investment's estimates, about 40 billion KRW in sales were not recognized in the first half.

However, IMM is expected to show significant growth from the second half. Researcher Jeong Yong-jin of Shinhan Financial Investment said, "With the asset recognition of IMM Line 2 in May, IMM's sales will show growth from Q3," adding, "IMM's sales, which were around 40.8 billion KRW in Q2 this year, are expected to increase to 64.5 billion KRW in Q3."

As volatility in secondary battery stocks increases depending on external factors, advice was given to choose stocks that can defend profitability. Researcher Jeong explained, "From the second half, supply disruptions due to parts inventory depletion are expected to expand," and "the global electric vehicle penetration rate, which led to earnings surprises for domestic secondary battery and material companies in the first half, may temporarily stagnate." Furthermore, he recommended, "In September and October, stocks that can defend profitability depending on domestic factors are recommended," and forecasted, "Iljin Materials will continue to have the highest profitability among secondary battery material companies."