[Click eStock] Ecopro, Record High Discount Rate After Transition to Holding Company "Outperforming in Resolution Phase"

[Asia Economy Reporter Lee Seon-ae] Samsung Securities announced on the 21st that it maintains a target price of 110,000 KRW and a buy rating for Ecopro, judging that the current phase is an outperformance in the discount rate resolution stage.

Ecopro experienced a sharp 45% drop over one month in January due to issues such as a fire at the Ochang plant of its main subsidiary Ecopro BM and a prosecution investigation into allegations of insider trading by key executives. Since then, Ecopro BM recorded a high stock return of 40% by the end of June compared to the January low, driven by steady demand in the front market and expectations of improved performance, whereas Ecopro only rose 10% during the same period. Accordingly, the discount rate compared to the value of listed subsidiaries including BM reached a record high of 29% as of June 27.

However, in July, the stock return recorded 30%, making it the best performer among Korea's secondary battery-related value chains. Researcher Jang Jeong-hoon of Samsung Securities stated, "Ultimately, the current phase is judged to be outperforming in the discount rate resolution stage."

Ecopro is a holding company with listed subsidiaries Ecopro BM (46% stake, cathode material manufacturing) and Ecopro HN (47% stake, greenhouse gas control). Among its unlisted subsidiaries related to secondary batteries are Ecopro Materials (51% stake, precursor manufacturing), Ecopro Innovation (97% stake, lithium hydroxide manufacturing), Ecopro CNG (47% stake, recycling), and Ecopro AP (90% stake, process gases).

On the 13th, Ecopro announced provisional results showing sales of 1.2 trillion KRW and operating profit of 170 billion KRW. This was largely influenced by the earnings surprise from its main cathode material manufacturing subsidiary Ecopro BM (sales of 1.18 trillion KRW, operating profit of 102.8 billion KRW), but it is also interpreted as reflecting a significant increase in operating profit from other unlisted affiliates, which rose sharply from 3.3 billion KRW in Q1 to 59.4 billion KRW. Due to a substantial increase in cathode material shipments, unlisted affiliates related to battery materials such as precursor and lithium hydroxide also showed strong performance.

Researcher Jang said, "It is necessary to confirm whether the strong performance of these unlisted affiliates is sustainable through the earnings briefing scheduled for early August. However, according to consolidated accounting, the operating profit performance of affiliates is fully consolidated into the parent company, but since net profit is eliminated as non-controlling interests, the valuation impact is limited," he explained.

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