[Click eStock] "EcoPro BM, LFP Expansion Concerns Overstated... Buying Opportunity"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating and a target price of 600,000 KRW for EcoPro BM on the 4th. Although the stock price has shown weakness due to concerns over the expansion of LFP batteries, it was judged to be a buying opportunity considering the medium- to long-term profitability.

EcoPro BM's consolidated results for the third quarter were 408.1 billion KRW in revenue and 40.7 billion KRW in operating profit, representing growth of 63% and 130% respectively compared to the same period last year. Net income attributable to controlling shareholders was 32.8 billion KRW, up 139% year-on-year. The sharp performance improvement continued for two consecutive quarters, setting a new quarterly record.

The consolidated operating profit exceeded the market expectation of 35.8 billion KRW, supported by the start of mass production of NCM9½½ and strong growth in EV-related sales (172.8 billion KRW, up 76% year-on-year), despite concerns over the vehicle semiconductor supply shortage. Researcher Jonghyung Lee of Kiwoom Securities explained, “Non-IT sales such as power tools and home appliances also recorded 217 billion KRW, a 53% increase compared to a year ago, and the rise in metal prices such as lithium and nickel was sufficiently reflected in product prices, resulting in stable performance.”

The operating profit margin recorded 10%, rising 0.6 percentage points from the previous quarter to reach an all-time high, maintaining unmatched profitability among domestic and international cathode material companies.

Currently, the company's stock price has been declining since the announcement in September of a long-term cathode material supply contract worth 10.1 trillion KRW with SK Innovation. The stock showed a weak trend last month due to concerns over EV production disruptions caused by vehicle semiconductor shortages and the announcement by Tesla and some automakers of expanded adoption of LFP batteries, which raised worries about medium- to long-term growth setbacks for high-nickel cathode materials such as NCM/NCA.

In response to concerns over the expansion of low-cost LFP batteries centered in China, the company plans to counter low-grade products with cathode materials currently under development, such as manganese-rich and cobalt-free types, while continuing to focus on high-nickel products for premium-grade materials, expecting sustained high growth in the medium to long term. Earlier this year, the company announced plans to mass-produce manganese-rich cathode materials around 2025.

Researcher Jonghyung Lee said, “Reflecting the third-quarter results and expansion schedule, we are raising our operating profit forecasts for this year and next year by 11% and 12%, respectively. This judgment is based on the perspective of medium- to long-term growth, considering unmatched profitability, aggressive capacity expansion, and vertical integration from used battery recycling to precursors and cathode materials.”

This content was produced with the assistance of AI translation services.