[Click eStock] "EcoPro BM, Target Price Lowered to 200,000 Won"

Hi Investment & Securities downgraded the target price of EcoPro BM to 200,000 KRW on the 8th, stating that "an enormous valuation premium is already reflected."

EcoPro BM's Q4 revenue last year was 1.2 trillion KRW, and operating loss was 114.7 billion KRW, significantly missing market expectations (revenue 1.6 trillion KRW, operating profit 30 billion KRW).

This was due to a decrease in cathode material shipments caused by weakening electric vehicle demand in North America and Europe amid the global high-interest-rate environment, as well as price declines and large inventory asset valuation losses resulting from sharp drops in raw material prices such as lithium and nickel.

Additionally, despite increased sales volume of cathode materials for power tools and ESS, revenue remained at the previous quarter's level due to price declines. The inventory asset valuation loss in Q4 was approximately 124.5 billion KRW, and excluding this, operating profit recorded 9.8 billion KRW, maintaining a positive earnings trend.

Although revenue contraction in 2024 is inevitable, profitability is expected to stabilize. Both shipment volume and prices are anticipated to remain sluggish.

The cathode material market for electric vehicles is expected to face a challenging year due to the global high-interest-rate environment and the chasm phenomenon (a stagnation period before technological innovation becomes widespread), which is slowing down front-end demand growth.

The cathode material market for power tools is also expected to continue facing difficulties as the housing market downturn prolongs and the inventory level of cylindrical batteries in the market remains high. Consequently, the company's cathode material shipment growth this year is projected to be limited to about 9% compared to the previous year.

Furthermore, lithium prices, which had been declining until January, are likely to impact cathode material price declines through the first half of the year. The current cathode material prices are estimated to be about 25% lower than last year's annual average, even assuming no further decline in lithium prices.

Even if lithium prices somewhat rebound in the second half of the year, the lagging effect is expected to limit the impact on this year's prices.

However, considering the cash cost levels of Chinese lithium refining companies, lithium prices are expected to bottom out at the current level. Profitability is judged to stabilize rapidly. Reflecting this, the estimated revenue and operating profit for 2024 are projected to be 5.3 trillion KRW and 266 billion KRW, respectively.