Amogreentech Increases Global Electric Vehicle Sales... Subsidiary Transactions Also 'Solid' [Company Insight]

Chinese electric vehicle (EV) companies are making significant strides in the global EV market. As the Chinese government continues its policies to expand EV adoption, 2,474,000 EVs were sold in China in the first half of this year, marking a 121% increase compared to the same period last year. During the same period, North American sales rose by 59% to 508,000 units. In the EV market, China's BYD surpassed the U.S. Tesla to become the top seller, with BYD selling 647,000 units?a 323% increase compared to the first half of last year. Tesla recorded EV sales of 575,000 units, up 52% year-over-year. China's Shanghai Automotive Industry Corporation (SAIC) sold 370,000 units, a 30% increase from the previous year. Asia Economy examines the business structures and growth strategies of Iljin Materials and Amotech Green Tech, which are expected to benefit from the growth of Chinese EV companies.

[Asia Economy Reporter Jang Hyowon] Amotech Green Tech, a supplier of key components to global EV manufacturers, is gaining attention. This is attributed to recent news of lifted lockdowns in China and a resurgence in EV sales. Amotech Green Tech's sales are largely driven by its affiliate Amotech, contributing to stable performance.

New Business Ventures in Electric Vehicles

Amotech Green Tech operates in advanced materials, functional components, and environmental and energy systems. It possesses core technologies spanning from material development to component design and manufacturing. It was the first in Korea and the third worldwide to develop and commercialize 'high-efficiency magnetic materials.'

Currently, high-efficiency magnetic materials are supplied to global EV manufacturers such as Tesla, Rivian, and BYD. Other key products include thermal management materials, nano membrane materials, flexible printed circuit boards (FPCB), and energy storage systems (ESS). As of the end of Q1 this year, high-efficiency magnetic materials accounted for the largest share of sales at 27.8%, followed by nano membranes (19.5%), thermal management materials (11.8%), and FPCB (18.6%).

Amotech Green Tech's performance has been on an upward trend annually. Last year, its sales reached KRW 122.1 billion. Sales have increased steadily from KRW 93.4 billion in 2019 and KRW 111.8 billion in 2020. Operating profit and net income also showed solid results last year, recording KRW 1.8 billion and KRW 2.7 billion respectively. Significant growth in sales of high-efficiency magnetic materials and ESS drove overall performance.

In Q1 this year, sales were KRW 36.3 billion and operating profit KRW 3 billion, representing increases of 19% and 266% respectively compared to the same period last year. High-efficiency magnetic materials are applied in inductors, a core component of electrical energy systems, critically influencing energy conversion efficiency. As applications expand to electrical energy systems in ships, construction machinery, and more, demand is expected to grow.

In particular, in the EV sector, as vehicle output increases, the need for high-efficiency power conversion devices has surged recently. Besides Tesla, the major customer this year, additional EV manufacturers have become clients, leading to a forecasted 39% year-over-year increase in high-efficiency magnetic material sales to KRW 52 billion.

ESS sales at Amotech Green Tech are also expected to more than triple this year compared to last year. Currently, the company is engaged in ESS business based on lithium iron phosphate (LFP) batteries and offers total solutions including battery management systems (BMS) and cooling systems. Starting this year, overseas projects with a Danish global wind power system company, a Japanese telecommunications firm, and electric locomotives are underway, with ESS business alone projected to generate approximately KRW 45 billion in sales.

NH Investment & Securities analyst Kang Kyung-geun stated, "Thanks to balanced growth across major business units, Amotech Green Tech is expected to record sales of KRW 168.7 billion and operating profit of KRW 14.4 billion this year, representing increases of 38.2% and 713.3% respectively compared to last year. The new business segment for power semiconductor ceramic substrates (SiC) is also expected to grow as initial shipments are made to global power semiconductor companies."

High Sales Proportion from Affiliates Ensures Stability

Amotech Green Tech maintains stable sales through transactions with its affiliate Amotech. As of the end of Q1 this year, Amotech purchased products worth KRW 12.9 billion from Amotech Green Tech, accounting for 35.7% of Amotech Green Tech's total sales. This transactional relationship has continued over the years. Last year, sales to Amotech amounted to KRW 51 billion, and in 2020, KRW 59.1 billion. Amotech accounted for 41.8% and 52.8% of Amotech Green Tech's total sales in those years respectively.

Supported by stable sales, Amotech Green Tech has posted operating profits for three consecutive years. In contrast, Amotech turned to operating losses starting in 2020 with KRW 4.9 billion and saw losses widen significantly to KRW 23.7 billion last year.

The largest shareholder of Amotech Green Tech is CEO Kim Byung-kyu, holding a 40.3% stake. Including shares held by his spouse, related parties, and executives, the controlling interest amounts to approximately 51.94%. Meanwhile, Kim holds a smaller stake in Amotech at 18.19%, and combined with his spouse and executives, the total is only 27.49%.