EcoPro BM Rising Unstoppably... Securities Firms Lower Target Prices

Sharp 70% Surge in One Month Since November... Announcement of Large-Scale Supply Contract with Samsung SDI
Brokerages Unite in Calling It "Overvalued"... Growing Uncertainty Over Demand Slowdown and Other Concerns

The stock price of Ecopro BM has surged by 70% over the past month. Securities firms are lowering their investment ratings and target prices, stating that the current stock price is already excessively high compared to earnings, but the stock price chart is moving in the exact opposite direction of the securities reports.

According to the Korea Exchange on the 5th, Ecopro BM's stock price closed at 323,000 KRW, up 15.36% in one day. Individual investors led the price increase by purchasing 135 billion KRW worth of shares. Institutional investors, including pension funds, sold 91 billion KRW, and foreigners sold 41 billion KRW worth of shares. Expanding the range to the past month, Ecopro BM's stock price rose 71.26% compared to 188,600 KRW at the close on the 1st of last month.

The surge in Ecopro BM's stock price is attributed to a large-scale supply contract with Samsung SDI. Ecopro BM announced after the market closed on the 1st that it signed a supply contract worth 43.87 trillion KRW for cathode materials with Samsung SDI's domestic and overseas factories. The contract period is five years, from early next year until the end of 2028. This is the first long-term supply contract since Ecopro BM (60%) and Samsung SDI (40%) jointly established Ecopro EM in 2020.

However, the securities industry views Ecopro BM's stock price as 'overvalued.' Despite the large-scale supply contract news, securities firms are lowering their investment ratings or target prices for Ecopro BM. Byunghwa Han, a researcher at Eugene Investment & Securities, said regarding this contract, "Ecopro BM only disclosed the applied exchange rate (1,306 KRW) and stated the supply scale as 'recent prices' only," adding, "Since cathode material prices continue to fall, the supply volume varies depending on the reference point." He emphasized, "There is no upward revision of earnings estimates due to this contract," and maintained the existing 'sell' rating, stating, "In the global battery value chain, only domestic cathode material companies receive excessively high valuations, which is difficult to justify except for temporary supply and demand factors."

Daishin Securities also described Ecopro BM's mid- to long-term growth potential as 'positive,' but lowered the target price from 300,000 KRW to 250,000 KRW, stating that it has already been reflected in the stock price. Changhyun Jeon, a researcher at Daishin Securities, said, "Mid- to long-term production expansion plans and vertical integration of the value chain through group companies are positive, but valuation burdens need to be considered."

Wonseok Jung, a researcher at Hi Investment & Securities, also maintained a 'neutral (HOLD)' rating, saying, "With short selling banned, if supply and demand concentration occurs due to this mid- to long-term supply contract, it could positively affect short-term stock price increases," but added, "There is unlikely to be a significant change in mid- to long-term earnings outlook." He further noted, "Considering concerns about weakening demand for electric vehicle batteries from domestic companies to Europe and the increasing uncertainty of the Biden administration's green policies ahead of the U.S. presidential election in November next year due to the possibility of a regime change, the stock price's upside potential will be limited for the time being."