[Practical Finance] Themes to Watch in the First Half: Robot, Energy, Battery, China

Rising Labor Costs and Inflation Highlight Robot Technology
Growing Interest in Renewable Energy Due to US and EU Energy Policy Changes

[Asia Economy Reporter Minji Lee] The financial investment industry unanimously agrees that this year, investors should closely watch stocks related to robots, energy, secondary batteries, and China reopening in the stock market. Robot-related stocks surged once as the robot industry attracted significant attention at the world's largest electronics and IT exhibition, 'CES 2023.' Expectations for market size expansion are expected to rise. Energy and secondary battery stocks showed strong upward trends as part of the 'Taejoibangwon (Solar Power, Shipbuilding, Secondary Battery, Defense, Nuclear Power)' theme that led the stock market in the second half of last year. This momentum is expected to continue this year. Following China's lifting of its zero-COVID policy, the flow of China-related consumer stocks is also anticipated to be positive.

According to the Korea Exchange, since the beginning of the year, Rainbow Robotics' stock price has risen by 105.83%. The stock price, which was around 34,000 KRW at the end of last year, quickly climbed to the 67,000 KRW range. Its market capitalization expanded to the 1 trillion KRW level, securing a position within the top 50 in the KOSDAQ market capitalization rankings. Rainbow Robotics was founded by a KAIST research team that developed HUBO, Korea's first humanoid bipedal walking robot. When robot technology gained attention at CES 2023, investor sentiment surged. Moreover, news that Samsung Electronics invested 59 billion KRW in Rainbow Robotics to acquire a 10% stake further attracted investors.

Consequently, other robot-related stocks such as Hurim Robotics (59.23%), Robostar (51.65%), Yuil Robotics (43.89%), and Eugene Robot (33.07%) also recorded significant gains. Since this theme has already risen considerably, some expect profit-taking selling to emerge. However, securities experts regard it as a promising theme for long-term investment. Due to inflation and rising labor costs after COVID-19, robot technology is gaining attention, and its applications are expected to expand beyond specific industries to various fields. Jae-hyuk Woo, a researcher at Mirae Asset Securities, stated, “The utilization of robots will increase across all industries, regardless of industrial or service sectors. Among related companies, those that have secured diverse user experience data will generate sales more quickly.”

In the energy sector, companies related to renewable energy such as wind and solar power are expected to attract attention. The effects of the U.S. Inflation Reduction Act (IRA), which provides subsidies to renewable energy operators, will be fully realized this year. Meanwhile, the European Union (EU) is actively expanding renewable energy businesses through its energy transition policy 'REPowerEU,' which aims to reduce dependence on Russian fossil fuels and focuses on hydrogen. Since the U.S. and EU have announced generous subsidies for companies operating renewable energy businesses domestically, it is advisable to focus on companies that have entered these markets. Byung-hwa Han, a researcher at Eugene Investment & Securities, analyzed, “Companies like CS Wind and Hanwha Solutions, which have built local production plants and contribute to regional carbon reduction and job creation throughout the value chain, are emerging as attractive investment targets.”

Secondary battery companies related to batteries have recently shown a downward trend as stock prices were negatively affected by falling sales prices due to stabilization of raw material costs and price cuts by automakers. LG Energy Solution, a leading domestic secondary battery stock, fell more than 20% from January 1 to January 18. However, experts say attention should be paid more to changes in sales volume than price declines. Hyuk-jin Yoon, a researcher at SK Securities, predicted, “Considering sales expansion due to Tesla's price cuts and stimulated purchasing desires from new electric vehicle launches by existing automakers, the battery market will continue to grow rapidly this year.” The high investment costs and difficulties in mass production also strengthen this outlook by raising entry barriers for latecomers. Recently, British Volt, a UK startup battery company, entered court administration due to liquidity issues, which is expected to increase demand for domestic battery companies.

Industries expected to benefit from China's reopening are also worth attention. Since the gates have been closed for years, a surge in revenge consumption by Chinese consumers is anticipated. Duty-free and cosmetics industries are cited as beneficiary sectors. Jena Heo, a researcher at DB Financial Investment, said, “Among industries with high exposure to China, it is time to proactively increase weights in industries with low performance bases but high profit improvement potential and stocks with strong recovery capabilities. Although the cosmetics sector's stock price has been suppressed for a long time and has started to rebound, as the number of Chinese tourists is expected to increase further from the end of the second quarter, expanding weights in the duty-free sector is also necessary.” Experts also advise paying attention to healthcare-related stocks such as implants and botulinum toxin in preparation for increased consumption by Chinese consumers.