[Click eStock] Cosmo Chemical, Notable External Growth in Used Battery Recycling

[Asia Economy Reporter Lee Seon-ae] On the 25th, KB Securities stated that attention should be paid to the external growth driven not only by the core business but also by new businesses of Cosmo Chemical. However, no investment opinion or target price was provided.

According to KB Securities, Cosmo Chemical is transforming from a titanium dioxide manufacturing company into a specialized secondary battery company. It has achieved vertical integration from raw material precursors to cathode materials, and stable growth is expected in the used battery market. Cosmo Chemical is the only domestic company that manufactures and sells titanium dioxide, a white pigment, and cobalt sulfate, a raw material for secondary battery cathode materials. It was established in 1968 and listed in 1987. Titanium dioxide is an inorganic compound applied in daily life such as plastics, roads, and rubber, securing about 70% domestic market share. Additionally, based on the cobalt sulfate business, it has entered the used battery recycling business.

Profitability can improve with the expansion of high value-added special-purpose titanium dioxide supply. The general pigment market is gradually shrinking, but the special-purpose segment is expected to grow at an average annual rate of 4.5% until 2024, driven by increased demand for electronic materials such as MLCC. Cosmo Chemical plans to focus on special-purpose products, raising the production ratio from the current 70% general-purpose and 30% special-purpose to 70% special-purpose. Special-purpose products are higher-priced compared to general-purpose ones, and assuming a 70% production ratio, the margin is expected to improve to around 10%.

Furthermore, attention is drawn to the opening of the used battery recycling market. Cosmo Chemical’s recycling business extracts nickel, cobalt, etc., from used batteries and supplies them to its subsidiary Cosmo Advanced Materials. After announcing a 30 billion KRW business investment in 2021, it additionally announced a 15.9 billion KRW investment in lithium carbonate facilities in June 2022.

Upon completion of expansion at the end of 2023, it will secure an annual production capacity of 4,000 tons of nickel, 2,000 tons of cobalt, and 1,000 tons of lithium. Based on current prices, this structure can secure approximately 250 billion KRW in additional sales.

However, risk factors include the importance of securing raw materials and the existence of overhang issues. KB Securities researcher Yoon Chang-bae said, "Stable pre-acquisition of used battery scrap, the raw material for used battery recycling, is important," and added, "There is also an outstanding convertible bond of 15 billion KRW (convertible shares 563,867 shares, conversion price 26,602 KRW)."