[Click eStock] "EcoPro BM, Slow Earnings Recovery... Target Price Down"

Target Price Revised Downward by 22% Compared to Previous Level

On the 18th, KB Securities downgraded the target price of EcoPro BM from 270,000 KRW to 210,000 KRW, stating that it will take more time for the company's performance to normalize. The investment rating was maintained as 'Buy.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is based on the assumption of adjusting the pace of production capacity expansion due to prolonged sluggish demand in the upstream market, leading to a downward revision of the estimated average annual growth rate of cathode material production capacity from 33% to 24% and the utilization rate from an average of 77% to 63% for 2024?2030."

EcoPro BM's third-quarter performance this year is expected to fall short of market expectations. The researcher said, "EcoPro BM's third-quarter sales are estimated at 556.1 billion KRW, down 69% year-on-year, with an operating loss of 28.4 billion KRW, falling below the consensus (average securities firm forecast). The selling price of cathode materials is expected to decline by 3% quarter-on-quarter, and sales volume is expected to decrease by 29%."

Despite improving demand for energy storage systems (ESS), sales volume is expected to decline significantly due to a decrease in electric vehicle demand across major customers. The researcher analyzed, "While the recovery of nickel-cobalt-manganese (NCM) demand for SK On continues to be delayed, sales volume for Samsung SDI's NCA (nickel-cobalt-aluminum), which had been holding up, has sharply declined due to the sluggish European electric vehicle market and the increased proportion of hybrid and plug-in hybrid vehicles by major original equipment manufacturers (OEMs), making poor performance inevitable. The reversal of inventory valuation allowances, which has been a variable affecting performance, is expected to be minimal due to the exchange rate decline at the end of September."

Performance is expected to show a strong rebound when upstream demand recovers. KB Securities estimates EcoPro BM's performance next year to be sales of 3.99 trillion KRW and operating profit of 156.6 billion KRW. Sales are expected to increase by 28% year-on-year, and operating profit is expected to return to profitability. The researcher said, "Due to the European Union's (EU) tightening of emission regulations in 2025, the sales trend of NCA and NCM to European OEMs is expected to improve from the fourth quarter of this year, and with the SK On-Ford joint venture (JV) plant in the U.S. starting operations next year, NCM demand recovery is anticipated. Although the growth pace is expected to be slower than previously anticipated, a strong performance rebound is expected when upstream demand recovers."