As Ecopro BM has recently shown an upward trend, expectations are growing that it may be able to break free from its previous slump. However, since variables such as the electric vehicle chasm (temporary demand stagnation) and uncertainties in U.S. policies, which have suppressed both performance and stock price, remain unresolved, the securities industry maintains a cautious outlook.
According to the Korea Exchange, Ecopro BM's stock price has risen by 28.12% this year through the 24th. It has surpassed the 140,000 KRW mark for the first time since the end of November last year.
Ecopro BM, Once Thriving, Hampered by Electric Vehicle Chasm
Ecopro BM is the leading domestic producer of cathode materials. With expectations for the expansion of the electric vehicle market, it emerged as one of the most watched stocks in the Korean stock market and climbed to the top spot in KOSDAQ market capitalization, enjoying a winning streak. It rose by 194.42% in 2021 and 212.7% in 2023, solidifying its position as the undisputed leader of KOSDAQ. However, concerns over a slowdown in electric vehicle demand changed the situation. Its performance fell short of expectations, and the stock price declined. Last year, it recorded an operating loss of 40.2 billion KRW, turning to a deficit, and its stock price dropped by about 62%. It lost the No. 1 spot in KOSDAQ market capitalization to Alteogen and slipped to second place.
Recently, its credit rating outlook was also downgraded. On the 11th, NICE Credit Rating maintained Ecopro BM's long-term credit rating at 'A' but lowered the rating outlook from 'stable' to 'negative.' Hyosung Shin, a senior researcher at NICE, explained, "Due to an unfavorable industry shift, the poor operating performance level across the Ecopro group is expected to continue. During the period of declining profitability, the burden of working capital and capital expenditures (CAPEX) will increase, expanding cash flow deficits and deteriorating financial stability." Earlier, in December last year, Korea Ratings also downgraded Ecopro BM's (A) credit rating outlook from 'stable' to 'negative.'
The market's focus is on when Ecopro BM can emerge from its slump. The securities industry forecasts a recovery trend toward the second half of this year. Jinmyung Lee, a researcher at Shinhan Investment Corp., said, "In the first quarter, losses will narrow due to increased sales volume of cathode materials mainly for electric vehicles (EV) and inventory valuation reversals. As we move into the second half, operating rates are expected to rise with the recovery of front-end demand, and a quarterly profit growth trend will appear due to the stabilization of metal prices."
Minwoo Joo, a researcher at NH Investment & Securities, said, "The recovery in front-end demand is expected to be stronger than anticipated, so we have raised the 2025 shipment forecast from 77,000 tons to 83,000 tons. The 2025 recovery is expected to be led by NCM (Nickel-Cobalt-Manganese), as NCM's end customers are preparing for inventory depletion in the second half of 2024 and new car launches in 2025 to comply with European CO2 regulations, necessitating inventory buildup. Demand for NCA (Nickel-Cobalt-Aluminum) is expected to improve in the second half." He added, "By securing about two new orders this year, dependence on specific original equipment manufacturers (OEMs) can be reduced." Reflecting this outlook, NH Investment & Securities raised Ecopro BM's target stock price by 10% to 165,000 KRW.
iM Securities also expects Ecopro BM to achieve a turnaround to profitability through gradual performance recovery this year. Wonseok Jung, a researcher at iM Securities, said, "Sales this year are expected to increase by 17% year-on-year to 3.2 trillion KRW, and operating profit will turn positive to 83 billion KRW. In the first quarter, operating profit is expected to turn positive to 1.5 billion KRW due to inventory depletion by customers and the effect of new car launches."
Although positive recovery forecasts are emerging, market conditions remain challenging. Hoisoo Ahn, a researcher at DB Financial Investment, said, "We conservatively assume a 21% year-on-year growth in shipments and about 45% operating rate compared to guidance. NCM products will grow in volume with new model launches from Ford and Nissan, but dramatic expectations are difficult due to U.S. policy uncertainties. NCA products face a challenging environment for growth unless European subsidies are reinstated, as volumes from Stellantis in Europe will be lost."
Preparing for KOSPI Listing but Facing Valuation Pressure
The planned transfer listing to the KOSPI market is also cited as a recent factor behind the stock price rally. Ecopro BM submitted a preliminary review application for KOSPI transfer listing to the Korea Exchange in November last year and is awaiting the review results. At the earnings conference call on the 11th, Ecopro BM stated, "The KOSPI transfer listing is currently under review by the exchange, and we are communicating to complete the listing process as soon as possible, but the review schedule may be somewhat delayed. We expect approval to be completed around the end of the first quarter this year, as there are no special disqualifications." Generally, moving from KOSDAQ to KOSPI acts as a positive factor for stock prices, as it is expected to improve supply and demand through corporate value revaluation and expansion of the investor base.
However, there are forecasts that the stock price upside will be limited due to high valuation pressure. Researcher Wonseok Jung said, "The current stock price is trading at price-to-earnings ratios of 69.0 times and 31.2 times based on expected earnings for 2026 and 2027, respectively, making it one of the highest-valued companies in the global secondary battery cell and materials sector. If the KOSPI transfer listing is confirmed around the end of the first quarter, passive fund inflows may cause a short-term stock price rally, but in the mid-to-long term, the potential for valuation increases is limited, so we maintain a cautious view on Ecopro BM."
Researcher Yongwook Lee of Hanwha Investment & Securities also said, "With the goal of KOSPI transfer listing by the end of the first quarter, stock price volatility due to supply and demand is expected to be high, but the trend of stock price increases will be limited."
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