[Click eStock] "S-Fuel Cell, Construction Market Deterioration... Target Price Down 13%"

Shinhan Investment Corp. Report
"Need to Confirm Results of New Business and European Expansion"

Shinhan Investment Corp. maintained its buy rating on S-Fuelcell on the 30th but lowered the target price by 13% to 28,000 KRW. This adjustment is due to the slowdown in the performance of its core business, building fuel cells, caused by the deterioration of the construction industry.

S-Fuelcell recorded sales of 8.3 billion KRW and an operating loss of 200 million KRW in the first quarter. The company turned to a loss compared to the same period last year due to the operating loss. This was because the building fuel cell business, which accounts for the majority of sales, shrank by 11% year-on-year due to the impact of the worsening construction market. Increased research and development (R&D) expenses related to new businesses and government projects also had an effect.

This year, the company’s sales and operating profit are expected to reach 58.4 billion KRW and 3.2 billion KRW respectively, representing growth of 25% and 166% compared to the previous year. This is because the construction market is expected to recover starting from the first quarter low. Typically, sales are concentrated in the second half of the year, with second-half sales estimated at 31.4 billion KRW, about twice the 15.9 billion KRW recorded in the first half.

Researcher Choi Kyuhyun of Shinhan Financial Investment explained, “Power generation sales (5 billion KRW), which had been continuously delayed, will also occur through securing new customers and entering the HPS market.” He added, “In the case of the building fuel cell business, focus should be on the fact that the mandatory market (ZEB - Zero Energy Building mandate) is driving market growth.” The domestic market for building fuel cells is estimated to grow at an average annual rate of 24% until 2030, and S-Fuelcell is the domestic market leader with a market share of 50-60%.

For the stock price to rise further, diversification of accessible markets and business portfolios is essential. Researcher Choi said, “Both of these will become visible starting in 2024. S-Fuelcell has obtained the European CE certification for its building products and plans to begin full-scale deliveries to the European market from next year.” He added, “The new mobility powerpack business is also expected to show meaningful results from the second half of next year.”