[Click eStock] "Sangshin IDP Shows Steady Growth... Profit Margin Improvement Also Noteworthy"

[Asia Economy Reporter Kwon Jaehee] Shinhan Financial Investment diagnosed on the 29th that Sangsin EDP "shows steady growth" and emphasized the need to pay attention to the trend of profit margin improvement. No specific investment opinion was provided.

Sangsin EDP's consolidated sales for the second quarter of this year reached 71.9 billion KRW, a 58% increase compared to the same period last year. Operating profit was 7.3 billion KRW, up 113.5% during the same period. However, due to a fire at the Malaysia factory in May, a loss on disposal of tangible assets amounting to 5.2 billion KRW occurred, resulting in a net loss attributable to controlling shareholders of -1.5 billion KRW. Since the company is insured against fire, insurance proceeds equivalent to the loss are expected to be received in the second half of the year. Also, as the impairment of low value-added lines did not affect the sales and operating profit in the second quarter, it is estimated that the fire will not impact the performance in the second half.

Sangsin EDP is expected to continue rapid growth of medium-to-large CANs centered on its Hungary factory. The proportion of medium-to-large CAN sales in Sangsin EDP increased from 1.8% in 2016 to 22.7% in 2018, 30.7% in 2020, and 39.9% in the second quarter of 2022, becoming a core business division. In line with the expansion of Samsung SDI's medium-to-large battery capacity (41.0 GWh in 2021 → 113.9 GWh in 2020-2025), the medium-to-large CAN segment is expected to sustain rapid growth. The Hungary corporation's medium-to-large CAN production lines have gradually increased from 4 lines in early 2021, and lines 9 and 10 are scheduled to be fully operational starting in the second half of this year. Currently, the Hungary factory can accommodate up to 16 lines in total, and additional land has been secured to quickly respond to increasing demand in the future. Furthermore, the cost of adding one production line is relatively low compared to other secondary battery component production lines, so financial pressure is not significant.

Accordingly, Sangsin EDP's annual sales for this year are expected to be 286.5 billion KRW, and operating profit is forecasted at 29.3 billion KRW, representing increases of 45.1% and 49%, respectively, compared to the previous year.

Researcher Hwang Seonghwan of Shinhan Financial Investment analyzed, "Due to a seasonal pattern of lower performance in the first half and higher in the second half, solid performance growth is expected to continue in the second half," adding, "With external growth, internal cost efficiency is continuously improving, so attention should be paid to the trend of profit margin improvement."