Da Watda vs Deo Ganda... Diverging Views on Ecopro BM

Downgrade to Sell at Eugene Investment & Securities, Hold at Samsung Securities
"Positive View Maintained Despite Short-Term Correction, Long-Term Growth Unchanged"

Following this year's hottest stock, Ecopro, a 'sell' opinion has also emerged for Ecopro BM. Ecopro BM's stock price started at the 90,000 won level early this year and surged to the 310,000 won level, overtaking Celltrion Healthcare to secure the top spot in KOSDAQ market capitalization. However, views on Ecopro BM in the securities industry are divided. Some see great growth potential, while others believe the stock price has already exceeded its fair value.

According to the Korea Exchange on the 4th, Ecopro BM closed at 249,500 won on the 3rd, down 6.55% from the previous trading day. Ecopro BM's stock price, which recorded a closing price of 93,400 won on January 2, the first trading day of the year, has risen 170% so far. After hitting an intraday high of 315,500 won on April 10, it has undergone a correction phase and has been fluctuating since.

Ecopro BM, which announced its first-quarter earnings on the 2nd, recorded sales of 2 trillion won and an operating profit of 107.3 billion won, meeting market expectations. Thanks to strong demand from major customers such as Samsung SDI and SK On, sales of cathode materials for electric vehicles accounted for 80% (1.6 trillion won) of total sales, showing a significant increase. However, profitability improved only slightly (by 0.4 percentage points) due to initial operating costs of new factories. Notably, from the second quarter, all production lines in the factory are expected to operate, leading to a substantial increase in sales volume, and in the second half of the year, an expansion in cathode material sales is anticipated due to increased operating rates.

After the first-quarter earnings announcement, a total of nine securities firms published stock reports on Ecopro BM on the 3rd. Among them, six raised their target prices, and three maintained their target prices. In particular, Eugene Investment & Securities downgraded its investment opinion on Ecopro BM to 'sell.' Researcher Han Byunghwa of Eugene Investment & Securities analyzed, "The current stock price of Ecopro BM reflects expected growth until 2030," adding, "Assuming Ecopro BM's growth proceeds as planned until 2030, a stock price above 200,000 won is considered overvalued."

Samsung Securities, which published a stock report on the 2nd and downgraded its investment opinion to 'hold,' also viewed that expectations for growth had been pre-reflected. Researcher Jang Junghoon of Samsung Securities analyzed, "The short-term surge in Ecopro BM's stock price largely reflects the benefits from the Inflation Reduction Act (IRA) and expectations of large-scale orders beyond fundamentals."

On the other hand, many securities firms still maintain a positive outlook. Researcher Lee Yongwook of Hanwha Investment & Securities said, "It is true that Ecopro BM's valuation burden is significant due to the short-term surge, but time will resolve the current burden," adding, "Steep growth is expected from this year through 2025, and there is room for mid- to long-term profitability improvement through vertical integration. Although short-term corrections may occur, mid- to long-term growth potential remains unchanged." Researcher Kwon Junsu of Kiwoom Securities also analyzed, "This year, high external growth is expected due to the downward stabilization of raw material prices, new car launches by front-end customers, and cathode material capacity expansion," adding, "From the second quarter, actual sales volume increases will appear, and in the second half, cathode material sales expansion is expected due to increased operating rates."

Despite the divided views in the securities industry, individual investors continued their buying rally. On the 3rd alone, they purchased Ecopro BM shares worth 40.857 billion won. Foreigners and institutions sold net amounts of 35.379 billion won and 8.153 billion won, respectively.