[Click eStock] "Cosmo신소재, Performance Driven by Cathode Materials... Target Price Raised"

[Asia Economy Reporter Myung-Hwan Lee] Mirae Asset Securities announced on the 27th that it maintains a buy rating on Cosmo Advanced Materials and has raised the target price from the previous 73,000 KRW to 90,000 KRW. This is due to the increased likelihood of supplying cathode materials for domestic electric vehicles and the upward revision of sales forecasts reflecting lithium prices.

Cosmo Advanced Materials recorded sales of 133.8 billion KRW in the third quarter of this year, a 12% increase from the previous quarter, and operating profit of 10.8 billion KRW, a 0.2% increase. By segment, sales of cathode materials increased by 37% from the previous quarter to 112.2 billion KRW, and operating profit grew by 35% to 9.9 billion KRW. Sales in other segments, including multilayer ceramic capacitors (MLCC), are expected to decline by 42% to 21.6 billion KRW, with operating profit plunging 75% to 900 million KRW compared to the previous quarter.

Mirae Asset Securities diagnosed that in the case of MLCC, due to sluggish market conditions, sales and operating profit of release films sharply decreased compared to the previous quarter. However, they analyzed that the operating profit of cathode materials continued solid growth compared to the previous quarter due to increased shipments of nickel-cobalt-manganese (NCM) cathode materials for Samsung SDI, along with the positive effects of product price and exchange rate increases.

Mirae Asset Securities forecasts that Cosmo Advanced Materials will record sales of 136.6 billion KRW and operating profit of 10.9 billion KRW in the fourth quarter. They also expect the sluggishness in MLCC to continue.

The background for the target price increase was cited as the growing possibility of supplying cathode materials for battery customers' electric vehicles domestically, leading to an upward revision of utilization rate estimates. The short- and mid-to-long-term price forecasts were also revised upward, reflecting mix improvements from high-nickel production in the second half of 2023 and recent lithium price trends.

Mirae Asset Securities diagnosed that as the supply shortage of high-nickel cathode materials continues, alliances and mergers in the cathode material supply chain are also underway. Cosmo Advanced Materials is expected to start mass production of high-nickel products for electric vehicles in the second half of next year, and detailed discussions with customers are ongoing.

Researcher Cheol-Jung Kim of Mirae Asset Securities analyzed, "If high-nickel cathode materials for electric vehicles are supplied next year, performance improvement due to a high-priced product mix improvement and line efficiency from producing a single-spec product, similar to early leading companies, is expected."