EcoPro BM (247540) reported third-quarter revenue below market expectations amid factors including weakness in the US electric vehicle market. However, the analysis suggests that medium- to long-term growth expectations remain intact, given plans to enter the US battery energy storage system (BESS) market by building a lithium iron phosphate (LFP) cathode materials production line and expectations that cathode materials sales will begin increasing substantially from 2028.
EcoPro BM's sulfide-based solid electrolyte material powder.
In a report dated November 6, Eugene Investment & Securities analyst Han Byung-hwa maintained a Buy rating on EcoPro BM and lowered the target share price from 200,000 won to 180,000 won. The revision reflected dilution from a capital increase equivalent to 10% of total listed shares. The previous day's closing price was 89,700 won.
EcoPro BM posted third-quarter revenue of 557.9 billion won and operating profit of 12.1 billion won, with revenue below the consensus estimates of 593.5 billion won in revenue and 12.3 billion won in operating profit. Han explained: “Sales of cathode materials for electric vehicle batteries fell 16% year on year because of weakness in the US electric vehicle market and a gap caused by electric vehicle model changes in Europe. Sales of cathode materials for BESS also declined 25% as the US BESS market shifted from being centered on ternary batteries to a market using both ternary and LFP batteries.” By contrast, revenue from cathode materials for data center battery backup units (BBUs) and power tools rose 54%. The Hungary plant, which began operating in June, temporarily suspended operations for an environmental inspection by authorities and resumed operations in late October. Related costs are being reflected in the third and fourth quarters.
The company also formally announced its entry into the LFP market. In its earnings announcement, EcoPro BM disclosed plans to build a production line with capacity for 50,000 tonnes of LFP cathode materials. It currently has only a 4,000-tonne pilot line. Han said: “The company had not previously been active in entering the LFP market because it judged that achieving price competitiveness against Chinese companies would be difficult and that maintaining its capabilities in high-nickel ternary materials was more important. However, its position appears to have changed as the BESS market expanded rapidly and US demand for non-Chinese LFP cathode materials increased sharply.” Han added: “The possibility that the European Union (EU) could restrict imports of Chinese LFP cathode materials if it introduces the Industrial Accelerator Act (IAA) would also be a reason for the investment.”
Han expected a substantial improvement in the core business's performance to begin in 2028. Production of cathode materials for existing customers' new electric vehicle models is scheduled to start at plants in Hungary and South Korea, while production for new customers secured through the Hungary plant is also scheduled to begin in 2028. Taking this into account, annual cathode materials sales are expected to rise from 69,000 tonnes this year and 71,000 tonnes next year to 106,000 tonnes in 2028. Han said: “We maintain our medium- to long-term growth expectations because the Hungary plant will benefit from increased demand for materials within the region under the IAA, while the new LFP line will enable entry into the US LFP BESS market. In particular, the increase in cathode materials sales starting in 2028 has high visibility, and we recommend an investment strategy based on that outlook.”
Original Korean article: Edaily
English brief by Korea Wind Intelligence, koreawindintel.com
