[Click eStock] "Cheonbo, Q3 Earnings Slump but Recovery Expected Next Year"…Target Price ↓

Shinhan Investment Corp. announced on the 21st that it is lowering the target price for Cheonbo to 150,000 KRW due to adjustments in earnings estimates. However, it maintained a buy rating, expecting gradual earnings growth next year driven by product portfolio diversification and regional sales mix.

Cheonbo's operating profit for the third quarter of this year recorded 800 million KRW, down 95% compared to the same period last year. The poor performance has continued after operating profits of 1.6 billion KRW in Q1 and 1 billion KRW in Q2.

The reasons for the weak earnings are mainly price reductions due to price cuts and volume decreases caused by demand slowdown, similar to the first half of the year. Due to the decline in sales of key products, the operating profit margin for Q3 was 1.7%.

Researcher Oh Kang-ho of Shinhan Investment Corp. said, "Some recovery can be expected in Q4," adding, "This is because earnings improvement is anticipated compared to the first half due to improved demand for battery materials." The sales revenue for Q3 is expected to be 50.2 billion KRW, with an operating profit of 2.6 billion KRW.

The stock price decline continues alongside the poor earnings. The year-to-date stock return has dropped by 53%. In particular, prices have fallen due to a decrease in raw material prices for secondary batteries, leading to lower selling prices. Looking at the average price trend of secondary battery products, it was 81,835 KRW in 2022, and recorded 61,402 KRW and 62,232 KRW in Q1 and Q3 of this year, respectively. The downward trend has stabilized since Q1. With improved demand for secondary batteries and price stabilization, the pace of earnings improvement is expected to accelerate.

Furthermore, next year marks the point when the full effects of capacity expansion will be reflected. Production capacity (CAPA) is expected to increase from 5,000 tons in 2022 to around 25,000 tons in 2024. Researcher Oh stated, "In 2024, we can expect price stabilization and demand improvement alongside the expansion," adding, "Based on the scenario analysis from the previous report, the possibility of earnings recovery in 2024 will inevitably increase with higher utilization rates. Sales revenue of 310.6 billion KRW and operating profit of 23 billion KRW are projected for 2024."

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