[Click eStock] "Dongkuk Industries, Time to Focus on Growth Potential"

Shinhan Investment Corp. analyzed on the 13th that it is time to pay attention to the growth potential of new businesses at Dongkuk Industries.

Dongkuk Industries is a company specializing in cold-rolled special steel and renewable energy, listed on the KOSDAQ market in 1999. Its main businesses are steel, renewable energy, and construction. Since 1967, it has served as a subsidiary of Dongkuk Steel, responsible for exporting group products.

As a new growth engine, it has entered the nickel-plated steel sheet business applied to cylindrical batteries and the tungsten market. This year, the estimated sales composition is 78% steel, 14% renewable energy, and 7% construction. The consolidated operating profit margin for 2023 is expected to be 0.6%.

Researcher Byunghwa Lee of Shinhan Investment Corp. explained, "Demand for nickel-plated steel sheets, the raw material for cylindrical battery cases, is expected to expand," adding, "due to the increased adoption rate of cylindrical batteries by automakers."

He continued, "Leading automakers such as Tesla, BMW, Volvo, and Jaguar have decided to adopt cylindrical batteries, which compensate for weaknesses by improving energy capacity and output. The adoption of cylindrical batteries leads to cost reduction in electric vehicle production due to high productivity," and added, "This is why an increase in the adoption rate of cylindrical batteries is expected amid the phase of reduced electric vehicle subsidies."

Battery cell manufacturers are expanding cylindrical battery factories. The global cylindrical battery production capacity (CAPA) is expected to reach 515 GWh by 2025. The demand for nickel-plated steel sheets for electric vehicles is projected to be 228,000 tons in 2025 and 547,000 tons in 2030. To expand nickel-plated steel sheet production, an investment of 110 billion KRW is underway, with a total CAPA of 130,000 tons planned?first phase 80,000 tons and second phase 50,000 tons. Construction began last year and is scheduled for completion in the second half of 2024. Sales expansion due to full-scale capacity increase is anticipated. The actual mass production is expected to start in early 2025.

Dongkuk Industries’ sales this year are forecasted to decrease by 17% year-on-year to 713.9 billion KRW, while operating profit is expected to increase by 244% to 4 billion KRW. This year is regarded as the first year to lay the foundation for mid- to long-term performance growth. Researcher Lee said, "Although short-term performance rebound may be limited, it is time to focus on the growth potential of new businesses restarting after 10 years," adding, "Sales of nickel-plated steel sheets are expected to reach about 170 billion KRW in 2025, accounting for 20% of sales within the steel business segment. This is a range where valuation re-rating is possible."