[Click eStock] "Seongil Hi-Tech, Scale Economy Possible Through Capacity Expansion... Competitiveness Up"

[Asia Economy Reporter Kwon Jaehee] Hana Securities evaluated Sungil Hightech, a specialized company in secondary battery recycling, on the 2nd as a company capable of achieving economies of scale due to industry-leading recovery rates and stable capacity 확보. However, no investment opinion or target price was presented.

Sungil Hightech's consolidated performance this year is expected to show sales of 194.8 billion KRW and operating profit of 25.1 billion KRW, representing increases of 32.3% and 49.1% respectively compared to the previous year. In 2023, sales are expected to reach 232.6 billion KRW and operating profit 27.5 billion KRW.

Sungil Hightech is responsible for the wet process in the post-processing of waste batteries, recovering raw materials in the order of copper, manganese, cobalt, nickel, and lithium. Compared to the dry process, the wet process has the advantages of lower initial costs, lower carbon dioxide emissions, and higher recovery rates of lithium and manganese. Sungil Hightech records one of the highest recovery rates (95%) in the post-processing industry.

Sungil Hightech is a company capable of economies of scale by securing capacity that enables stable procurement of raw materials and extraction. Sungil Hightech operates a structure where black powder is manufactured at eight recycling parks and raw materials are extracted at two domestic hydro centers. The overseas recycling parks had a capacity of 61,000 tons last year, with plans to expand to 173,000 tons by 2025. It is understood that the current capacity has exceeded 100,000 tons, and overseas expansion is ongoing. The expansion of recycling park capacity is expected to create a favorable environment for external growth by ensuring stable raw material supply and price competitiveness through economies of scale. The annual capacity of Hydro Centers 1 and 2 is 4,400 tons, and the construction of a third plant is planned. The third plant is scheduled to start operations in the second half of next year and expand capacity to 10,000 tons in 2024, with total capacity in 2025 estimated to enable sales of around 500 billion KRW.

Researcher Kim Doohyun of Hana Securities analyzed, "Competition for securing raw materials within the industry continues, highlighting Sungil Hightech's competitiveness as a stable supplier of battery scrap." He added, "With continuous capacity expansion of the recycling parks and hydro centers, which generate 95% of sales, along with significant performance growth after 2023 and the government's eco-friendly policy direction, Sungil Hightech's products will become even more attractive."