[Click eStock] WCP, Increasing Investment Appeal in Secondary Battery Materials

[Asia Economy Reporter Lee Seon-ae] Shinhan Investment Corp. announced on the 20th that it maintains a buy rating and a target price of 70,000 KRW for WCP. The previous day's closing price was 43,900 KRW, indicating an upside potential of 59.5%. This is based on the assessment that among secondary battery materials, WCP has a high investment attractiveness.

Jung Yong-jin, a researcher at Shinhan Investment Corp., stated, "Although there has been a short-term demand slump due to the seasonal off-season (discount sales season) and a sharp rise in interest rates, the mid- to long-term growth potential of the electric vehicle market is clear," adding, "The solid performance suggests that the company can get through the off-season, which increases its investment appeal."

He pointed out that there is a chill in the stock market toward the automobile and secondary battery value chains at the end of this year. Until the third quarter, the automobile and electric vehicle industries continued strong performance, influenced more by supply advantages caused by supply chain disruptions than by the ongoing interest rate hikes within the year. Researcher Jung analyzed, "The products had strong sales and high price pass-through power," and "As the interest rate hikes reached their final stage, consumer sentiment cooled faster than expected, rapidly spreading concerns about a slowdown in automobile sales." He viewed key triggers such as the decline in used car prices, shortened new car delivery schedules, and falling lithium prices as leading indicators of demand slowdown.

However, Researcher Jung judged that there is price resistance to overcome the demand slowdown. He said, "Among secondary battery materials, companies whose final products are electric vehicle models in the luxury segment or those with high fixed costs and low cost and price volatility will have higher short-term earnings visibility," emphasizing, "WCP supplies separators to BMW’s luxury electric vehicles through its cell customers, and while the price of the main material, polymer PE, remains stable, the operating rate of its main factories is maintained at 100%."

WCP’s fourth-quarter performance is forecasted to be sales of 67.5 billion KRW and operating profit of 19.5 billion KRW, representing increases of 5.3% and 5.9% respectively compared to the previous quarter. This reflects the judgment that high profitability will continue.