EcoPro, EcoPro BM shares fall on disappointing second-quarter earnings

The EcoPro chart is displayed on the Yonhap Infomax screen in Seoul on July 10. [Photo by Yonhap]

EcoPro Co. and its subsidiary EcoPro BM Co. reported preliminary earnings results for the second quarter. that fell short of market expectations.

EcoPro recently turned heads when its stock price topped 1 million won ($785) at one point, making it the most expensive stock in South Korea.

Despite a continued increase in sales due to the strong global electric vehicle market, the decline in key raw material prices affected the average selling price (ASP) of the two companies, according to analysts. With the stock price skyrocketing this year and securities analysts practically giving up on forecasts, the lower-than-expected performance raises concerns of overvaluation.

On Wednesday, EcoPro said in its disclosure filing that its preliminary sales for the second quarter reached 2.01 trillion won, up by 63.4 percent from 1.23 trillion won a year ago. Operating profit reached 166.4 billion won, down by 2.1 percent from the previous year’s 169.9 billion won. EcoPro is a holding company with subsidiaries such as EcoPro BM, which manufactures cathode materials, a key component for electric vehicle batteries.

According to market tracker FnGuide, analysts estimated that EcoPro’s second-quarter sales would reach 2.18 trillion won, with operating profit at 225 billion won. However, Samsung Securities was the only brokerage firm to release its forecast. When compared to the consensus, second-quarter sales fell short by 7.5 percent, and operating profit down 26 percent.

EcoPro BM also reported its preliminary results for the second quarter, saying that its operating profit was 114.7 billion won, up 11.5 percent from a year ago. However, this figure was 11.02 percent lower than the consensus estimate of 128.9 billion won.

The underwhelming performance had a negative impact on the stock prices.

On the same day, EcoPro closed at 920,000 won on the Kosdaq, down 5.74 percent from the previous session. EcoPro BM also fell 5.42 percent to end at 279,000 won.

Analysts suggest that the recent decline in selling prices for cathode materials used in EV batteries is affecting the profitability of Korean cathode material manufacturers. The prices of key raw materials for batteries, such as nickel, cobalt, and manganese (NCM), which are mainly used by Korean battery companies, have been on a downward trend, leading to lower selling prices.

Nickel prices dropped from $30,000 per ton earlier this year to around $21,000 per ton in March. Lithium hydroxide prices also fell from around $70,000 per ton at the start of the year to the $40,000 range in the second quarter.

Normally, it takes about two to three months for changes in raw material prices to be reflected in the selling prices of cathode materials.

Some view the deterioration in the profitability of cathode material producers as a temporary phenomenon, as there are indications of a rebound in raw material prices.

There is still a possibility for further stock price increases for EcoPro, as there is an expectation that it will be included in the MSCI Korea Index next month.