[Click eStock] "Solus Advanced Materials to Return to Profit in Q2"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 103,000 KRW for Solus Advanced Materials on the 22nd, citing growing expectations for improved earnings.

Solus Advanced Materials, a company specializing in battery copper foil and OLED materials, reported first-quarter results with sales of 123.6 billion KRW and an operating loss of 2.4 billion KRW. While sales increased by 39% compared to the same period last year, the company turned to a loss. By segment, the battery copper foil division saw sales of 30.1 billion KRW as sales of products for major customers began to increase significantly. The segment's loss is estimated to be similar to that of the fourth quarter, but considering the sales growth, the loss ratio is believed to have been significantly reduced.

The copper foil segment, which relies on 5G network equipment as its front-end demand, recorded sales of 51.8 billion KRW, down 4% from the same period last year. The OLED segment for smartphones and TVs grew sales by 44% during the same period.

Second-quarter results are expected to show sales of 125.9 billion KRW and operating profit of 4.2 billion KRW, up 3% and 99% respectively from the same period last year, indicating a possible operating profit turnaround after three quarters. Hyunsoo Kim, a researcher at Hana Financial Investment, explained, “In the battery copper foil segment, second-quarter sales are expected to decrease by 5% due to European geopolitical risks and worsening electric vehicle production disruptions caused by semiconductor supply shortages, but ongoing yield improvements are predicted to slightly reduce the segment’s loss compared to the previous quarter.” For the copper foil segment, increased investment in network equipment is expected to drive sales growth and profitability improvement compared to the previous quarter.

Looking at the annual performance, the battery copper foil segment is expected to return to profitability starting from the fourth quarter this year. The battery copper foil segment is projected to achieve sales of 824.7 billion KRW and operating profit of 101.2 billion KRW in 2024. Accordingly, the company’s overall operating profit is estimated to increase to 32.5 billion KRW this year, 101 billion KRW in 2023, and 215.2 billion KRW in 2024.

Researcher Hyunsoo Kim stated, “Despite a 14% increase in the number of tradable shares due to the recent rights offering, the earnings momentum is expected to be reflected more significantly,” adding, “From the perspective of existing shareholders, considering the rights offering price of 49,400 KRW, participating in the subscription is reasonable.”