Investors warned about sharp rise in shares of EcoPro firms

EcoPro Co. logo [Courtesy of EcoPro]

Investors have been warned to exercise caution when investing in South Korea’s EcoPro Co. and EcoPro BM Co. as their short-term price surges may have already reflected their long-term future values.

According to industry sources on Wednesday, Hana Financial Investment Co. lowered its recommendation on EV battery materials supplier EcoPro to sell from buy even as it raised its target price to 454,000 ($343) from 158,000 won. However, this new target price is still far below the current trading price of around 700,000 won on the KOSDAQ market.

EcoPro’s stock price has surged 13 times to 820,000 won on April 11 from 62,068 won intraday on June 23 last year.

“EcoPro’s current market capitalization has already exceeded its expected enterprise value five years from now, making it difficult to view the stock as a good buy at this point,” said Kim Hyun-soo, an analyst at Hana Financial Investment, in a report released on Wednesday.

Although the transition to a carbon-neutral economy and the trend of developed markets like the U.S. shifting away from China support the future performance of South Korea’s battery industry, it is risky to anticipate developments over the next 60 months ahead, the report emphasized.

“Considering the policy trends in the U.S. and Europe, as well as the average electric vehicle project period of car companies, the longest timeframe for South Korea’s battery industry to be valued at the present time is around 50 months to 60 months from now, roughly 2027 based on current standards,” Kim said.

EcoPro BM Co. headquarters [Courtesy of EcoPro BM]

According to Hana Financial Investment, EcoPro’s estimated enterprise value based on the expected profit of its subsidiaries in 2027 is 5.8 trillion won for EcoPro BM, 3.6 trillion won for EcoPro Materials, 600 billion won for EcoPro Innovation and 800 billion won for EcoPro CnG, totaling 11.8 trillion won.

“EcoPro is a company that captures the growth value of the battery industry and the differentiated value of the metals business, but its current stock price already reflects much of that,” Kim said. “All that is required for its stocks to rise further is the time lapse to reflect 2030. Pricing in 2030 results will require a significant adjustment period to confirm mid-term results for the foreseeable future.”

Samsung Securities Co. also lowered its recommendation on EcoPro to hold, while raising its target price to 380,000 on April 4, which is also much lower than the current market price.

“The target price for EcoPro was raised due to the surge in the stock prices of EcoPro BM and EcoPro HN in the past two months, but the fair value was calculated to be 380,000, which is lower than the current stock price. Therefore, we lowered our investment rating to hold,” said Chang Jung-Hoon, an analyst at Samsung Securities.

Analysts have also issued warnings of overheating for EcoPro BM shares whose price has jumped 3.6 times to 315,500 won intraday on April 10 from 86,900 won in late September last year.

Chung Won-suk, an analyst at Hi-Investment & Securities Co., lowered his recommendation on the stock to hold from buy, saying that EcoPro BM has priced in earnings levels until 2030. The brokerage raised its price target for EcoPro BM to 265,000 won from 160,000 won, reflecting the company’s future growth plans for 2027. However, the price target is below the current market price of 290,000 won.