[Click eStock] Dongwha Enterprise, Secondary Battery Electrolyte Sales Drive Growth

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 17th that it maintains a buy rating and a target price of 136,000 KRW for Dongwha Enterprise, stating that the electrolyte segment led the improvement in performance.

The target price was calculated by estimating Dongwha Enterprise's corporate value at 3.2 trillion KRW and reflecting net borrowings of 400 billion KRW, resulting in a target market capitalization of 2.8 trillion KRW.

The company posted first-quarter sales of 283 billion KRW, a 35% increase compared to the same period last year, and an operating profit of 28.6 billion KRW, up 13%, exceeding market expectations. Kim Hyun-soo, a researcher at Hana Financial Investment, said, "The electrolyte segment for secondary batteries, which accounts for 13% of sales, drove performance growth as shipments of medium-to-large electrolytes for electric vehicle batteries increased, and sales of small electrolytes rose 29% year-on-year due to strong demand for power tools." He added, "As a result, combined sales in the electrolyte segment increased by 150% to 36.1 billion KRW, and the segment's operating profit margin remained at -1.5%, similar to the previous quarter, as the elevated cost level (LiPF6 price) continued."

The building materials segment, which accounts for 87% of sales, grew by 26% during this period, and profitability improved by 6.1% compared to the fourth quarter, when one-time costs were incurred at the Vietnam factory.

Second-quarter consolidated results are expected to show sales of 301.1 billion KRW, a 30% increase year-on-year, and an operating profit of 31.3 billion KRW, up 13%. The electrolyte segment is projected to increase to 23.5 billion KRW in the third quarter and 30.2 billion KRW in the fourth quarter due to growing sales of electrolytes for medium-to-large batteries driven by the electric vehicle market expansion.

Researcher Kim said, "We maintain our previous forecast that the electrolyte segment will enter profitability in the third quarter," adding, "The recent drop in LiPF6 spot prices is expected to work favorably for Dongwha Enterprise during long-term agreement (LTA) negotiations and contribute to profitability improvement in the second half of the year." He emphasized, "We believe there is significant potential for further upward revisions in earnings estimates through future electrolyte capacity expansion and profitability improvements."