[Promising Industries & Stocks①] Secondary Battery Components & Equipment... Sinseong Delta Tech, Samki, Wonik P&E, Cowintech

[Asia Economy Reporter Lee Seon-ae] #If last year was a liquidity-driven market due to rapid liquidity expansion, this year is marked by notable stock price increases in sectors and stocks with definite earnings growth. With increased market volatility, a selective approach toward stocks with clear earnings growth prospects in the second half of 2021 and 2022 is necessary. Daishin Securities identified promising sectors for the second half as ① parts and equipment within the secondary battery industry, which has high growth visibility beyond 2022, ② individual consumer goods with valuation appeal expected to show earnings growth in 2022, and ③ healthcare, expected to see earnings growth through overseas expansion.

The secondary battery industry is currently the leading sector in the market and is expected to experience the most distinct high growth through 2025 and beyond. Among these, attention is needed on parts and equipment stocks with relatively high valuation appeal.

According to Daishin Securities on the 19th, the representative leading sector in the current market is the secondary battery industry. In June, major battery companies announced large-scale overseas expansion plans, and in August, U.S. President Joe Biden issued an executive order to increase the share of electric vehicles in new car sales to 50% by 2030, expanding interest in the secondary battery market. Previously, many expected the share of electric vehicles in the U.S. new car market by 2030 to be below 40%, but this higher target could accelerate mid- to long-term growth. Major countries such as the U.S., Europe, and China are focusing on battery technology and supply chain security, and major domestic battery companies plan to establish a stable secondary battery supply chain.

In the mid- to long-term production capacity expansion phase of secondary battery companies, material, parts, and equipment companies will directly benefit. Among these, material companies within the secondary battery sector have seen relatively rapid stock price increases. Due to high external growth and the high value-added nature of core materials, they are receiving high valuations with a 12-month forward price-to-earnings ratio (PER) exceeding 50 times, reflecting expectations of steep profit margin improvements.

On the other hand, parts and equipment companies are also expected to see significant earnings growth after 2022 due to their clients' expansion, but their 12-month forward PERs differ greatly, with parts companies at about 14 times and equipment companies at about 16 times. Along with explosive investment in the upstream industry, equipment companies are securing large-scale orders,

and parts companies are experiencing concurrent growth in scale and profits due to increased operating rates. Given their high valuation appeal, stock prices are expected to trend upward in line with the sector's high growth.

Researcher Han Kyung-rae of Daishin Securities stated, "For promising stocks in the secondary battery industry in the second half, we recommend Sinseong Delta Tech, Samki, Wonik P&E, and Cowintech."