[Click eStock] "Ecopro, First 'Sell' Opinion Emerges... Beware of FOMO"

by Kwon Jaehee

Published 12 Apr.2023 08:09(KST)

Hana Securities downgraded its investment opinion on Ecopro to 'Sell' on the 12th, setting a target price of 454,000 KRW.

Hana Securities warned that both FOMO buying and avoidance should be cautious. The term 'FOMO (Fear Of Missing Out) syndrome' refers to the anxiety of feeling left out alone during a stock price rally. Hyunsoo Kim, a researcher at Hana Securities, said, “Buying while taking on risk is dangerous, but dismissing the 562% stock price increase over three months as mere market mania also risks misreading the current position,” adding, “It is a time that requires a thorough review of the fair value.”

Researcher Kim stated, “While the industry's growth potential is solid, the decarbonization policy trend and the US-China conflict, which are the causal variables of growth, cannot exclude the possibility of changes in their paths depending on each country's political and economic situations,” and “Considering the entry of new competitors over time, the policy frameworks of the US and Europe, and the average electric vehicle project period of automobile companies (5 to 7 years), it is judged that the Korean secondary battery industry can appropriately bear risk and realize its current value approximately 50 to 60 months later.”

[Click eStock] "Ecopro, First 'Sell' Opinion Emerges... Beware of FOMO"

In light of this, the latest point in time when Ecopro’s value can be reflected in the stock price is roughly 2027, based on early 2023 standards.

So far, Ecopro has faced difficulties in valuing the long-term profit value of each subsidiary due to uncertainties regarding the scale of unrealized consolidated profits after adjusting for internal transactions among consolidated subsidiaries (sales of precursors and lithium hydroxide corporations to the cathode material corporation). However, through recent business reports and audit reports of unlisted subsidiaries, it has been confirmed that the company has stable profit-generating capabilities, securing grounds for valuation based on profit value. Since the entire expected cathode material capacity of Ecopro BM, the source of precursor and lithium hydroxide sales, for 2027 is based on binding contracts with customers, the visibility of cathode material sales is solid, and accordingly, the performance visibility of the precursor and lithium hydroxide subsidiaries in 2027 is also judged to be very high.

Researcher Kim analyzed, “Based on the expected profits of each subsidiary in 2027, Ecopro’s combined target market capitalization is 11.8 trillion KRW,” adding, “It is a great company, but the current stock price already reflects a significant part of that greatness.”