[Click eStock] "Solus Advanced Materials Nears US Investment... Will Escape Undervaluation"

Expected to Achieve First Annual Profit in the Battery Foil Sector
Active Entry into the US Market... Potential to Secure Additional Clients

[Asia Economy Reporter Minwoo Lee] As Solus Advanced Materials concretizes its entry into the U.S. market within this year, there are expectations that it will expand its production capacity and increase its market share. Analysts believe the company can break free from its undervaluation compared to competitors.

On the 20th, Yuanta Securities projected Solus Advanced Materials' consolidated Q3 performance for this year to be sales of 11.9 billion KRW and operating profit of 12.6 billion KRW, representing increases of 55.3% and 67.4% respectively compared to the same period last year. Compared to the previous quarter, operating profit is estimated to surge by as much as 511%.

Although shipments of battery foil were partially delayed due to a recall issue with a major customer's secondary batteries, the resulting revenue deferral is expected to be minimal. Q3 battery foil sales are forecasted at 18.4 billion KRW, a 172% increase from the previous quarter. Researcher Kim Kwangjin of Yuanta Securities stated, "The increased operating rate of the Hungary Plant 1 will significantly reduce the deficit," adding, "With further increases in operating rates in Q4, the battery foil segment is expected to achieve its first quarterly profit."

As entry into the U.S., one of the world's top three electric vehicle markets, is expected to be concretized within this year, the company is also likely to expand its scale. This is because the United States-Mexico-Canada Agreement (USMCA), effective from 2025, requires establishing local production systems. Researcher Kim explained, "So far, Solus Advanced Materials has been the latest entrant among the three domestic battery foil companies, facing some difficulties in securing orders and stabilizing business, but it plans to proactively expand market share early in the U.S. market through early entry," adding, "There is also potential to secure additional customers beyond the existing major clients."

The initial scale of U.S. entry is estimated to be between 40,000 and 60,000 tons. Mass production preparations are expected to be completed by the end of 2024. Reflecting the U.S. entry, Solus Advanced Materials' battery foil production capacity is projected to expand from the current 100,000 tons to 140,000 tons by the end of 2024.

Against this backdrop, the investment opinion on Solus Advanced Materials was maintained as "Buy," with the target price raised by 67% to 110,000 KRW. The closing price on the previous day was 87,600 KRW. Researcher Kim analyzed, "Considering that major secondary battery stocks have begun to reflect expected growth values for 2024 in their stock prices, this valuation is very conservative, indicating that the company has been undervalued compared to others," adding, "Factors such as poor profitability in the battery foil segment and small production capacity compared to competitors have acted as discounts on the stock price, but with the imminent turnaround to profitability and U.S. market entry, the company is entering a phase of resolution, narrowing the market capitalization gap with competitors."