[Featured Stock] Gangwon Energy to Produce 1,000 Tons of Lithium Hydroxide Monthly for Secondary Batteries... Biggest Beneficiary of IRA-Driven Localization

[Asia Economy Reporter Hyungsoo Park] Gangwon Energy is showing strong performance. It appears that the analysis predicting it as the biggest beneficiary of the localization of secondary battery materials and equipment is influencing the stock price.

As of 11:27 AM on the 15th, Gangwon Energy is trading at 8,320 KRW, up 15.32% compared to the previous trading day.

Jongwoon Park, a researcher at FS Research, explained, "Among Gangwon Energy's secondary battery equipment, the electric heater dryer is expected to replace the existing heat medium dryer and see significant growth starting next year."

He added, "Orders for engineering and manufacturing of cathode material preprocessing equipment, the main business of its subsidiary Gangwon iSolution, are increasing sharply, and full-scale sales of lithium hydroxide, a core secondary battery material, are expected from next year."

He emphasized, "With the recent passage of the US IRA Act, the need for localization of secondary battery materials has increased, and more attention should be paid to the expected benefits for Gangwon Energy."

It is estimated that on a consolidated basis this year, sales will reach 100 billion KRW and operating profit 10.5 billion KRW, representing increases of 126% and 452% respectively compared to last year.

Researcher Park said, "Even with conservative estimates, next year's sales and operating profit are expected to grow by 70% and 143% year-on-year to 170 billion KRW and 25.5 billion KRW, respectively, because sales from new businesses targeting cathode material companies and anhydrous lithium hydroxide from Gangwon iSolution will be fully reflected."

In June, Gangwon Energy signed an MOU worth 39.5 billion KRW with Gyeongju City to build a lithium hydroxide and cathode material additive production plant. The high-purity lithium hydroxide powder production plant, being constructed on a 11,000-pyeong site with a factory area of 3,600 pyeong, is scheduled for completion in 2024. Researcher Park explained, "It can produce 1,000 tons per month," adding, "Gangwon iSolution's lithium hydroxide is anhydrous lithium hydroxide with extremely low moisture content."

He emphasized, "By adding a drying process to the existing lithium hydroxide production process, the volume is reduced by 60%, and it can satisfy both the fine nano particle size and moisture content requirements of lithium materials demanded by cathode material companies."

He said, "Currently, there are not many domestic companies producing anhydrous lithium hydroxide, so Gangwon Energy has a competitive advantage over existing companies," and "After quality progress, orders from two cathode material companies are expected as early as the end of this year or early next year."

Researcher Park explained, "Gangwon Energy is uniquely equipped with both materials and equipment among secondary battery materials and equipment companies." He continued, "Considering that the equipment market is an oligopoly and Gangwon Energy is replacing it, and that the materials business meets the structural growth requirement of localization, the valuation has sufficient grounds to receive a premium compared to existing competitors."

He judged, "Even considering the recent sharp rise in stock price, the current stock price is still undervalued once orders for electric dryers and anhydrous lithium hydroxide businesses begin."