EcoPro BM share drops as falling material costs forecast to hurt revenue

EcoPro BM Co., the top stock on South Korea’s junior bourse Kosdaq, declined on Wednesday as some brokerage houses have downgraded the shares from buy to hold or sell, forecasting that falling raw material prices will hurt the cathode producer’s revenue.

Its share price dropped 6.55% to close at 249,500 won ($188.5) on May 3. It fell further to hit 246,000 won on Thursday.

Three brokerage firms, Eugene Investment & Securities Co., Samsung Securities Co. and Yuanta Securities Co. said the electric vehicle battery material maker’s performance will be impacted as prices of key cathode components such as nickel and cobalt, which soared last year, have stabilized since early this year.  

EcoPro BM sets its cathode price by reflecting the key materials’ costs. The nickel price closed at $26,100 per ton on May 3, falling 16.3% from Jan. 3, according to Korea Mineral Resource Information Service. Cobalt closed at $34,485 per ton on Wednesday, dropping by 33% from Jan. 3.

Eugene Investment & Securities Co. suggested investors sell EcoPro BM stocks. It was the first time that a brokerage firm has recommended dumping the battery material maker's shares.

“We have concluded that EcoPro BM’s stock above 200,000 won is overvalued as the growth rate of the EV and battery markets are expected to fall to the 10% range by 2030,” Eugene analyst Han Byung-hwa said in a report on Wednesday.

“Although the company is highly competitive in making high-nickel cathodes, local peers and rivals in Japan and Europe are pouring in money to increase facilities. Chinese firms are also rapidly expanding their presence in Europe and emerging markets,” Han added.

Samsung Securities has downgraded EcoPro BM shares from buy to hold, with a target price of 250,000 won.

“The share price, which has nearly trebled since early this year, reflects investors’ excessive expectations that the company will receive a great amount of orders from global clients and will benefit from the US’ Inflation Reduction Act,” Senior Analyst Chang Jung-hoon said in a report on May 2.

Yuanta Securities also downgraded the shares from buy to hold, citing the company’s limited upside potential due to the current overvaluation. It suggested a target price of 290,000 won in its Wednesday report.

Write to Tae-Ung Bae at btu104@hankyung.com

Jihyun Kim edited this article.