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Hydrogen economy

Hydrogen: Next big thing for stock investors in Korea

Hydrogen stocks are set to become market darlings as the hydrogen boom takes off, analysts say

By Sep 13, 2021 (Gmt+09:00)

Korean conglomerates bet big on hydrogen
Korean conglomerates bet big on hydrogen

In 2009, battery makers were barely on the radar in South Korea when it comes to stock investment. Back then, the rechargeable battery industry was just burgeoning.

Some smart investors, however, began to amass stocks like LG Chem Ltd., which in that year announced its supply of batteries for GM’s first mass-produced electric cars. LG Chem’s shares have since risen tenfold.

Now that the hype about battery plays slowly fades as those stocks have already outperformed the market by a big margin, hydrogen, deemed the “fuel of the future,” is primed to offer attractive opportunities for investors.

With big conglomerates betting big on the hydrogen economy, announcing huge investment plans one after another, market analysts say hydrogen stocks will be the next big thing for investors.

“The hydrogen industry has just begun and related stocks were out of the limelight until recently because of the relatively small size of the hydrogen market. But it is now one of the fastest-growing industries with governments and companies getting serious about it,” said Eugene Investment & Securities analyst Han Byung-hwa.

According to financial data company FnGuide, the FnGuide Hydrogen Economy Theme Index’s one-month return on investment rate was 2.78% as of Sept. 12, higher than the FnGuide Secondary Battery Industry Index’s 1.26% gain.

Hyundai Motor's XCIENT is the world's first mass-produced fuel cell electric truck
Hyundai Motor's XCIENT is the world's first mass-produced fuel cell electric truck

ALREADY RALLYING

Some of the hydrogen-related stocks are already outshining amid a nationwide push for one of the most promising sources of clean fuel for a net-zero emission world.

Hyosung Advanced Materials Corp., a carbon fiber manufacturer, rose 14.5% in the past week to a record 679,000 won on Friday. Hyosung is the only Korean company that can produce high-intensity carbon fibers used to make hydrogen tanks. The hydrogen tank accounts for about 20% of the costs of a hydrogen vehicle.

Iljin Hysolus Co., regarded as the world’s only mass producer of hydrogen tanks for commercial use, rose by the daily limit of 30% upon listing on the main Kospi market on Sept. 1.

Kolon Industries Inc., a maker of polymer electrolyte membranes, a key material for fuel cells for hydrogen cars, also gained 12.2% over the past week to an all-time high of 94,900 won on Friday.

Ammonia is also emerging as a shining star in the hydrogen game as it provides a source of hydrogen for fuel cells.

Lotte Fine Chemical Co., whose main products include ammonia, gained 19.6% in the past week.

Currently, there are three ways to make hydrogen.

Grey hydrogen is produced when the element is stripped from fossil fuels, while blue hydrogen is produced from natural gas and produces less carbon dioxide (CO2). Green hydrogen is the cleanest variety as it uses renewable energy to produce hydrogen from water.

Of the three, blue hydrogen and green hydrogen are regarded as eco-friendly energy sources.

A hydrogen fuel cell system built by Doosan Fuel Cell
A hydrogen fuel cell system built by Doosan Fuel Cell

FUEL CELL & MOBILITY

Analysts say one of the sectors that will see faster growth than others in the hydrogen value chain is the fuel cell and mobility segment.

Doosan Fuel Cell Co., a unit of Doosan Group, is a leading company in the global hydrogen fuel cell market.

Earlier this year, the heavy machinery and power equipment-focused group said it is launching a task force to foster the hydrogen fuel cell business as one of its key growth drivers.

Analysts say Hyundai Motor Co. is not just an automaker but a hydrogen play for investors.

Hyundai’s XCIENT is the world’s first mass-produced fuel cell electric heavy-duty truck launched in 2019. In June of this year, the company unveiled an upgraded version of the zero-emission truck, equipped with more efficient fuel cells with a longer lifespan.

Last week, Hyundai Motor Group Chairman Chung Euisun unveiled the group’s long-term hydrogen strategy, under which it will provide fuel cell versions for all its commercial vehicles by 2028, making it the first global automaker to realize such ambitions for the commercial vehicle lineup.

Hydrogen fuel tanks manufactured by Iljin Hysolus
Hydrogen fuel tanks manufactured by Iljin Hysolus

Some of the hydrogen stocks recommended as top picks by eBest Investment & Securities include Hyosung Advanced Materials, Kolon Industries, Sang-A Frontec Co. and UNID Co.

SK Securities has named Doosan Fuel Cell, Hyundai Rotem Co., Hyosung Chemical Co., Energy & Machinery Korea Co. (EM Korea) and Iljin Hysolus as its top picks in the hydrogen sector.

“Hydrogen stocks will continue to be the market darlings in the fourth quarter when the government is expected to unveil its Hydrogen Economy Roadmap 2.0,” said Shinhan Investment Corp. analyst Kim Da-mi.

“But as the saying goes, all that glitters is not gold. You need to keep that in mind when you invest in hydrogen stocks.”

Write to Hyung-gyo Seo at seogyo@hankyung.com

In-Soo Nam edited this article.

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