[Click eStock] "Cheonbo Expected to Miss Q2 Operating Profit Consensus"... Target Price Down

[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities downgraded the target price of Cheonbo from 460,000 KRW to 300,000 KRW on the 11th, stating that inflation-induced decline in real purchasing power will lead to reduced spending on secondary batteries for electric vehicles, resulting in a smaller-than-expected increase in lithium salt usage. However, the buy rating was maintained.

Cheonbo's sales for the second quarter of this year are expected to be 65.4 billion KRW, and operating profit 12.1 billion KRW, down 17% and 19% respectively from previous estimates. Additionally, operating profit is expected to fall short of the consensus estimate of 13.9 billion KRW. This is due to the sharp decline in raw material purchases by electrolyte companies in April and May caused by China's COVID-19 lockdown, which accounts for more than half of Cheonbo's secondary battery material purchases. However, since June, electrolyte and cell companies have resumed material purchases, indicating that the worst is over. The price of LiPF6 (lithium hexafluorophosphate) has fallen 48% over the past three months, and additive prices have also dropped 42-45%.

The estimated sales of secondary battery materials in the second quarter increased by 10% year-on-year to 41.2 billion KRW. Since lithium salt prices stabilized after the 15th of last month, and with the normalization of secondary battery production in Europe and the US in the third quarter, Cheonbo's lithium salt shipments are expected to rebound.

Researcher Kim Jeong-hwan of Korea Investment & Securities explained, "The Chinese secondary battery value chain is rapidly recovering from the lockdown impact, so lithium salt shipments in the second half of the year will not decrease but rather increase. However, reflecting the sufficiently lowered product prices and the easing of aggressive lithium salt purchasing patterns by electrolyte companies, the operating profit estimate for the second half is lowered by 8% to 36.5 billion KRW."

He added, "The operating profit estimate for 2023 is revised down by 13% to 104.3 billion KRW, a 57% increase compared to the previous year. This is because the sales estimate was lowered by 12% reflecting price declines, but the high profit growth rate remains unchanged due to increased adoption of Cheonbo's products by OEMs such as Tesla and secondary battery companies in next-generation batteries."

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