[Click eStock] WCP, Earnings Normalization Delayed... Investment Rating and Target Price Lowered

Investment Rating Downgraded from "Buy" to "Neutral"
Target Price Lowered by 33% from Previous Level

On July 2, KB Securities reported that the normalization of earnings for WCP is being delayed due to sluggish industry conditions. As a result, the firm downgraded its investment rating from 'Buy' to 'Neutral' and lowered its target price from 12,000 won to 8,000 won.

Lee Changmin, a researcher at KB Securities, explained, "The reason for lowering the target price is that we have revised downward our operating profit estimates for 2025 and 2026, reflecting a reduction in shipment forecasts to major customers due to delayed recovery in end-market demand, as well as the impact of a decline in the won-dollar exchange rate." He added, "With the target price cut, the potential upside from the previous day's closing price is only 9.6%, so we have also downgraded our investment rating."

The company is expected to remain in the red in the second quarter of this year. Lee estimated, "WCP's second-quarter results are expected to show sales of 29.1 billion won, down 75% year-on-year, and an operating loss of 23.5 billion won, which would be in line with the consensus (the average forecast of securities firms)." He continued, "Compared to the first quarter, which saw the worst results due to inventory adjustments in the end-market (sales of 16.3 billion won and an operating loss of 30.4 billion won), a meaningful rebound in shipment volume is expected. However, the recovery in shipments for electric vehicle (EV) customers is likely to fall short of market expectations, so both separator films for prismatic batteries and separator films for cylindrical batteries are expected to continue underperforming." He further noted, "In addition, the decline in the won-dollar exchange rate will also limit the extent of earnings improvement."

Whether earnings rebound will depend on securing new customers. Lee stated, "The excessively high dependence on a single customer, combined with weak end-market demand, has led to poor results. Ultimately, only a sharp rebound in demand from the single customer or securing new customers to increase utilization rates will enable earnings improvement. It is expected that new customers for separator films for cylindrical batteries could be secured as early as the beginning of 2026. The timing of the start of shipments to new customers and the resulting increase in shipment volume will determine the extent of future earnings improvement."