[KOSDAQ report (51)] POSCO Chemtech eyes lithium ion battery market

This is the 51st in a series of articles analyzing companies listed on the KOSDAQ, Korea’s secondary stock market loaded with tech firms. - Ed.

POSCO Chemtech, the POSCO subsidiary that specializes in refractory and lime production, will produce materials for lithium ion battery cathodes in 2013.

“We will begin producing materials for lithium ion battery cathodes in 2013, and raise the company’s annual revenues to 3 trillion won ($2.6 billion) by 2015,” POSCO Chemtech president Lee Sang-young said. 

“The tar produced by POSCO each year will provide the raw materials. It will mean the localization of materials used in lithium ion batteries, which are currently mostly imported.” 

POSCO Chemtech chief executive Lee Sang-young (POSCO Chemtech)

Tar, which is generated as a byproduct in the process of making coke from coal, needs to undergo three-step processing to make materials for lithium ion battery cathodes. According to POSCO Chemtech, each stage results in marketable products and the company plans to manufacture all three products.

For the new business, the company is looking to collaborate with a Japanese company producing lithium ion battery materials. The company is also considering plans to take over a local firm that has related technologies.

According to company officials, it has secured 300,000 square meters of land to build production facilities, and is reviewing ways to secure 200 billion won funds required for the project.

Although the project is still in the early stages, and it will be some time until POSCO Chemtech will see any return from the investment, the company has seen significant growth from its existing businesses. 

The company’s revenues rose by 28.5 percent from 2008 to come in at 574.4 billion won last year, while operating profits increased by 29.3 percent over the same period to 41.5 billion won.

The company has continued on an upward slope so far this year, with first quarter figures rising to record levels.

The company’s first quarter sales increased by 22.9 percent from the previous quarter to 160.8 billion won and operating profits jumped by 114.8 percent to 14.2 billion won.

Over the same period, POSCO Chemtech’s net profits increased by 153.9 percent to come in at 12 billion won. Lee attributed the rise to the company’s lime business, which accounted for 42.5 percent of the company’s 2009 sales. 

For this year, Lee said that the company is targeting 700 billion won sales and 60 billion won operating profits.

Concerning share prices, Lee said that POSCO Chemtech shares are still undervalued, and that as the average price earning ratio for 2008 and 2009 is 8.7, the company’s shares should be at least 70,000 won.