[Click e-Stock] "S-Fuelcell Needs to Restore Damaged Growth Potential... Investment Rating Downgraded"

Investment Rating Downgraded from 'Trading Buy' to 'Neutral'

On December 2, Shinhan Investment & Securities downgraded its investment rating for S-Fuelcell from 'Trading Buy' to 'Neutral,' stating that the company needs a catalyst to recover its damaged growth potential. The firm did not provide a target price.

Choi Kyuhun, a researcher at Shinhan Investment & Securities, commented, "Overall, the company's growth potential has been significantly impaired. Although its domestic business is the main driver, the downward trend has continued since 2022, and delays in the timeline for its growth pipeline are also problematic." He added, "Nevertheless, the turnaround in the fuel cell industry, driven by the emerging data center market in the United States, represents a major opportunity for S-Fuelcell. At present, the performance of its data center-related business initiatives is of critical importance."

Shinhan Investment & Securities estimated S-Fuelcell's consolidated sales for this year at 21.9 billion won, down 35% year-on-year, with an operating loss of 6.5 billion won. Choi explained, "This is due to the continued slump in the construction industry, which is an upstream sector. While investments in R&D for new mobility businesses, scaling up, and cost reduction continue, the company's overall size has contracted significantly, increasing the burden of fixed costs. It is difficult to expect visibility for a turnaround to profitability in the near future."

The consensus is that top-line growth is ultimately crucial for overcoming the current situation. Choi stated, "There are pipelines that could restore growth, such as pioneering the existing apartment market, expanding overseas, the hydrogen forklift business, and backup power solutions for data centers. It is important to assess the current status of the existing apartment market business, which can leverage the strengths of the company's core business and impact profitability. Additionally, the data center-related business, which has recently driven a turnaround in the global fuel cell industry, is also a key factor for top-line growth."