[Click eStock] "WCP, Profitability Recovery Possible from Second Half... Target Price Down"

Target Price Lowered from 19,000 KRW to 12,000 KRW

On the 6th, KB Securities downgraded the target price of WCP from 12,000 KRW to 19,000 KRW, anticipating a recovery in profitability from the second half of the year. The investment rating was maintained as 'Buy.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is due to the downward revision of the estimated sales volume of separators from 8.9 billion ㎡ to 7.5 billion ㎡ for 2024-2043, reflecting the slowdown in the growth of the electric vehicle market leading to decreased front-end demand and the postponement of the start of new production facilities. Additionally, the average operating profit margin for the same period was lowered from 3.9% to -7.3%."

Performance is expected to remain weak in the first quarter of this year as well. KB Securities estimates that WCP's first-quarter sales will be 26.2 billion KRW, a 79% decrease compared to the same period last year, and an operating loss of 39.3 billion KRW, turning to a deficit and falling short of the consensus (average securities firm forecast). The researcher analyzed, "Following the previous quarter, both the separators for prismatic batteries and cylindrical batteries are expected to perform poorly. Due to the high fixed cost ratio characteristic of the separator business, profitability deterioration caused by a sharp drop in operating rates continues. The prolonged Red Sea incident has increased logistics costs, and various new product testing and commissioning costs are also factors expanding the operating loss." Demand for prismatic battery separators is expected to gradually recover from the second quarter due to a rebound in demand for electric vehicles (EV) from major customers, but demand for cylindrical battery separators remains weak across all end users, suggesting prolonged poor performance.

Gradual recovery is expected from the second half of this year. The researcher stated, "A significant loss is inevitable until the first half, but from the second half, profitability recovery is possible with the rebound in operating rates as demand for prismatic separators recovers. Additionally, one or two new customers seeking high-penetration separators for cylindrical batteries are expected to be added to the customer base from the second half, so a gradual improvement in operating rates is anticipated."