[Click eStock] "Inseon ENT, Lowered Earnings Outlook for Spent Batteries... Target Price ↓"

NH Investment & Securities announced on the 27th that it is lowering its performance outlook for Inseon ENT's spent battery recycling business this year. Accordingly, it maintained the investment rating of 'Buy' but lowered the target stock price to 13,000 KRW.

Baek Joon-gi, a researcher at NH Investment & Securities, explained, "Although we raised the target EV/EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) multiple to reflect the value of the spent battery recycling business (from 10.7x to 10.9x), we lowered the earnings estimates for 2023, the valuation reference year, which led to a reduction in the target stock price."

Researcher Baek also analyzed, "The landfill business, which accounted for half of the profits, underperformed due to price declines caused by the entry of new landfills. New landfills require the import of landfill materials such as incineration ash to stabilize the landfill base, and the price reduction of incineration ash was a factor that generally lowered the landfill import prices."

He pointed out, "Inseon ENT's landfills are located in Gwangyang and Sacheon, so it was negatively affected by customer acquisition and price reductions related to new landfills in the Chungcheong and Gyeongsang regions."

However, it is expected that the full-scale acquisition effect will occur this year due to the performance improvement of Youngheung Industrial Environment and Paju B&R. Researcher Baek forecasted, "Youngheung Industrial Environment recorded an operating loss of 3 billion KRW in 2022, but it is expected to positively contribute to the improvement of consolidated operating profit by improving to an operating profit level of about 5 billion KRW this year."

He also explained that a revaluation of the supply network value of Inseon ENT's subsidiary, Inseon Motors, is necessary. He evaluated, "Inseon Motors' steel scrap business site in Icheon trades with more than 40% of the approximately 600 car dismantlers nationwide," adding, "It has strengths not only in battery pack dismantling but also in logistics networks related to car dismantling, securing a relative advantage compared to other supply companies."

He added, "Inseon ENT's 2023 sales are expected to improve to 267.7 billion KRW, a 12.6% increase from the previous year, and operating profit is expected to increase by 29.7% to 43.1 billion KRW."