[Click eStock] SaevitChem, Steady Sales Growth Through Long-Term Supply Contracts

[Asia Economy Reporter Lee Seon-ae] Hana Securities evaluated Saevitchem on the 2nd as a waste battery recycling company with unique technology, expecting steady sales growth through long-term supply contracts. However, no investment opinion or target price was presented.

Saevitchem started its wastewater treatment chemical business and waste acid recycling business from semiconductor and display production processes in 2005, and officially entered the waste battery recycling business in 2017. Saevitchem purchases black powder extracted through the waste battery pretreatment process and manufactures NCM (Nickel/Cobalt/Manganese) mixed solution to supply to precursor companies. The recovery rate of valuable metals is 95%, the highest in the industry, and by supplying NCM in liquid form, process simplification is possible, resulting in high cost competitiveness. Major customers include leading companies such as EMT, a high-nickel precursor production company, LG Chem, POSCO Chemical, and L&F. In 2021, sales reached 33.3 billion KRW, with the sales ratio by business division being 68% from waste battery recycling and 32% from waste acid recycling.

Growth in scale is expected due to the rapid increase in waste battery generation and recycling demand following the expansion of electric vehicle adoption. As the necessity of a battery circular economy is emphasized, internalization and cooperation in waste battery recycling businesses among the three domestic cell makers are actively progressing. In March, Saevitchem received approval from LG Chem to supply precursor composite solution and signed an MOU to supply the precursor composite solution to Korea Precursor Co., Ltd. (Kemco), a joint venture between LG Chem and Korea Zinc. The structure involves receiving raw materials from LG Chem and delivering the precursor composite solution to Kemco. The supply period is a long-term contract lasting 10 years from June 2024, enabling stable sales growth. Using 19 billion KRW from the public offering funds, facility expansion is planned, and upon completion, Saevitchem's production capacity is expected to reach 30,000 tons, tripling the current capacity.

When converted to sales, the supply scale to LG Chem is estimated to increase sales by approximately 100 billion KRW. It is judged that cooperation and supply references with large corporations are important at this early stage of the waste battery recycling market, and Saevitchem is also expected to continue external growth through phased expansions.

This year's performance is expected to show sales of 44.7 billion KRW, a 33.8% increase, and operating profit of 10.8 billion KRW, a 94.9% increase. For 2023, sales are expected to increase by 65.9% to 74.2 billion KRW, and operating profit is expected to increase by 54.6% to 16.7 billion KRW. Kim Doo-hyun, a researcher at Hana Securities, analyzed, "From 2023, external growth due to expansion is expected," adding, "In addition to the precursor composite solution, new recovery of high-purity lithium carbonate is expected to enable sales growth through product diversification."