[Click eStock] "EcoPro BM, Steady Progress in Enhancing Mid- to Long-Term Competitiveness Despite Temporary Setback"

NH Investment & Securities maintained a buy rating and a target price of 310,000 KRW for Ecopro BM on the 3rd, stating that although the second-quarter earnings this year are inevitably temporarily sluggish due to price declines and conversion investments, the fundraising for mid- to long-term competitiveness improvement, additional orders, and preparation for mass production of new products are progressing smoothly.

Juminwoo, a researcher at NH Investment & Securities, explained, "Short-term performance is expected to be weak due to price declines, conversion investments, and sluggish demand for power tools, but preparations for mid- to long-term competitiveness improvement are underway," adding, "Funds raised through convertible bonds (CB) are expected to be used for expanding overseas factories."

Considering Ecopro BM's market capitalization, it is evaluated that the company has entered a virtuous cycle structure where it can timely raise capital minimizing dilution compared to latecomers, fulfill large-scale expansions required by customers on time, receive orders, and enhance corporate value. Researcher Joo said, "The drivers for future corporate value enhancement are expected to be additional orders for cathode materials for existing customers and responses to new products."

Ecopro BM's second-quarter sales are expected to increase by 67% year-on-year to 1.98 trillion KRW, and operating profit is expected to rise by 16% to 119.2 billion KRW, which are 9% and 10% lower than the consensus estimates, respectively.

The main reasons cited are a 5% price decline in the second quarter compared to the previous quarter due to the impact of lithium price drops at the beginning of the year, temporary shipment sluggishness caused by conversion investments in CAM5N, and a slower-than-expected recovery in power tool demand. The CAM5N conversion investment is estimated to be an investment to respond to the production capacity (CAPA) increase of the F-150 Lightning. Researcher Joo said, "The increase in inventory assets to 1.2 trillion KRW in the first quarter appears to be due to the pre-production of NCM811 products ahead of the conversion investment," adding, "The impact of price declines and CAM5N conversion investments is expected to partially continue until the third quarter."

He also added, "The third-quarter price is expected to decline by 8% compared to the previous quarter, and shipments are expected to increase by 18% compared to the previous quarter."

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