[Click eStock] "Enchem, Full-Scale Growth Expected This Year... Projected Sales of 1 Trillion Won"

Daishin Securities analyzed on the 28th that Enchem is expected to experience full-scale growth this year due to the effect of capacity expansion. No investment opinion or target price was presented.

Enchem recorded sales of 424.7 billion KRW and operating profit of 3 billion KRW last year, representing decreases of 17% and 80% respectively compared to the previous year. Yang Ji-hwan, a researcher at Daishin Securities, explained, "Sales and profitability declined compared to the previous year due to a slowdown in front-end electric vehicle (EV) demand mainly in the Chinese market," adding, "Profitability was weak due to price declines, raw material lagging, and fixed cost burdens from new capacity expansion."

He said, "This year, the sales guidance aims for more than 1 trillion KRW," and added, "With plans to expand scale mainly in North America, profitability is expected to recover."

Daishin Securities expects that the effect of capacity expansion for Enchem will become fully apparent this year. He analyzed, "Due to the nature of the product, electrolyte is recommended to be locally procured and supplied," and "It is usually located near battery factories, and Enchem is also entering local markets together with battery customers."

He explained, "Enchem's nominal electrolyte capacity is expected to expand to over 1 million tons in 2025?2026," and "The regional proportions are estimated to be North America (40%), China (30%), and Europe (30%)."

He said, "In the Chinese market, Enchem will pursue market entry and share expansion targeting CATL and Chinese battery companies," and "In Europe, local supply response to LG Energy Solution and SK On is expected mainly in Poland and Hungary."

He emphasized, "In the United States, through proactive local entry compared to competitors, Enchem is expected to secure the position of main local vendor centered on domestic battery companies and new customers."

Along with this, stable raw material procurement through vertical integration is also anticipated. He said, "Raw materials account for 70% of the cost structure of electrolyte," and "The cost structure of raw materials is approximately 45% lithium salt, 30% additives, and 25% organic solvents."

He explained, "Electrolyte is a business structure whose profitability is greatly affected by raw material price fluctuations," and "Enchem plans to secure lithium salt (LiPF6) production capacity through Ediel in Saemangeum, Korea."