[Click e-Stock] "Cheonbo, Tesla Beneficiary Company... Expecting External Growth Increase"

[Asia Economy Reporter Kwon Jaehee] Yuanta Securities maintained a "Buy" rating on Cheonbo on the 3rd and set a target price of 292,000 KRW.

Cheonbo is considered a leading beneficiary company of lithium iron phosphate (LFP) batteries, which Tesla is focusing on. Tesla emphasizes compatibility with all battery compounds, including LFP and ternary batteries, related to drive units and reduced use of SiC. In particular, Tesla has focused on LFP batteries as a low-cost battery; therefore, cathode materials used in next-generation vehicle manufacturing are expected to utilize both LFP and ternary materials, with attention on cathode materials that can reduce battery costs. Cheonbo is regarded as a representative beneficiary of the domestic LFP expansion. Cheonbo produces special lithium salts and additives applied at higher concentrations than ternary materials to improve the ionic conductivity of LFP batteries.

Cheonbo is expected to see significant top-line growth this year, with sales of 544.4 billion KRW and operating profit of 99.4 billion KRW. Production capacity is expected to expand from 4,700 tons in 2022 to 17,000 tons in 2023, marking the start of substantial growth. Cheonbo plans to leverage its higher price competitiveness compared to Chinese companies to rapidly expand its electrolyte market share, focusing on China and Europe. Under this strategy, profit margins may decline somewhat, but it is still expected to maintain relatively high profit margins (around 17%) compared to other battery materials. Starting in 2023, the company plans to apply a manufacturing method that reduces production costs by 30% through switching to cheaper raw materials instead of using expensive LiPF6, aiming to target the European and U.S. markets and rapidly expand its global market share.

Researcher Lee Anna of Yuanta Securities analyzed, "There was almost no expansion momentum last year, and since it is not a beneficiary material of the Inflation Reduction Act (IRA), the stock price has been overlooked. However, with an additional 12,330 tons of mass production starting this year, growth centered on Europe and China is expected through a market share expansion strategy."