Resource Nationalism And Battery Shifts Will Dim Future Prospects

Key Takeaways

• Rising raw material costs, shifting battery technologies, and underutilized expansion plans threaten long-term margins and revenue growth.
  
• Increased ESG compliance and customer concentration expose the company to higher costs and greater revenue volatility.
  
• Enhanced operational capacity, upstream supply security, customer diversification, and financial strength position Ecopro BM for sustained growth, improved profitability, and reduced risk in a recovering market.

Catalysts

Ecopro BM Co. Ltd. develops and sells cathode materials used in batteries in Korea and internationally.

• An increasing risk of resource nationalism and geopolitical instability in major mining countries threatens to disrupt or significantly increase the cost of critical raw material supplies like nickel, on which Ecopro BM depends; this would put long-term downward pressure on the company's gross margins and operating profit.
  
• Rapid advances and shifting OEM preferences towards alternative battery chemistries, including solid-state technologies and the broader commercialization of cost-effective LFP and sodium-ion batteries, could dramatically reduce demand for Ecopro BM's high-nickel cathode products. This shift would cause long-term declines in market share and revenue growth potential.
  
• The company's plans for major capacity expansions-in Hungary and Indonesia-face a substantial risk of becoming underutilized as global supply/demand imbalance develops due to aggressive capacity additions by competitors and moderating demand growth. Underutilized assets would increase depreciation and fixed costs, depressing operating margins and earnings.
  
• Heightened and constantly evolving ESG regulations globally, coupled with stricter environmental scrutiny on materials processing and mining, will continue to escalate compliance costs, forcing Ecopro BM to allocate more capital to upgrade their supply chain and production practices. This structural cost inflation is likely to erode net margins over the long term.
  
• Heavy exposure to a handful of large battery and automotive customers leaves Ecopro BM vulnerable to contract renegotiation, downstream technology pivot, or demand reduction. Should any major customer reduce orders or shift to alternate suppliers or battery chemistries, revenue volatility would spike, raising the risk of lower sales and significant earnings instability in future years.

Ecopro BM Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on EcoPro BM compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming EcoPro BM's revenue will grow by 20.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -3.8% today to 1.6% in 3 years time.
• The bearish analysts expect earnings to reach ₩67.3 billion (and earnings per share of ₩828.61) by about August 2028, up from ₩-92.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 113.0x on those 2028 earnings, up from -130.7x today. This future PE is greater than the current PE for the KR Electrical industry at 24.2x.
• Analysts expect the number of shares outstanding to grow by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.32%, as per the Simply Wall St company report.

Ecopro BM Future Earnings Per Share Growth

Risks

• Ecopro BM is projecting a strong rebound in 2025, with anticipated sales volume growth of approximately 40% driven by inventory normalization, new EV model launches among key customers, and successful order wins from new OEMs, which would directly support revenue recovery and higher operating earnings.
  
• The upcoming completion and ramp-up of the Hungary plant, with its 54,000-tonne capacity and commercial production expected to begin in late 2025, positions Ecopro BM to benefit from European EV and battery market expansion, which could lead to sustained revenue growth and improved capacity utilization.
  
• The strategic acquisition of Green Eco Nickel in Indonesia will provide access to 20,000 tonnes of nickel production, solidifying upstream supply security and cost competitiveness for Ecopro Materials, and is projected to add about ₩100 billion in operating profit per year, bolstering consolidated earnings and net margins.
  
• Ongoing customer diversification and technology development efforts, including R&D in advanced LFP cathode materials, project collaborations with major automakers like Hyundai, and expansion of oxidation precursor and metal sulfate businesses, support future market share gains and longer-term revenue stability.
  
• Significant improvement in the company's financial structure through capital raising, reduced debt ratios, and strengthened liquidity ensures flexibility for capital expenditures and growth initiatives, lessening financial risk and supporting improved earnings and net margins as industry conditions recover.

Valuation

• The assumed bearish price target for EcoPro BM is ₩60000.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of EcoPro BM's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩180000.0, and the most bearish reporting a price target of just ₩60000.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₩4190.3 billion, earnings will come to ₩67.3 billion, and it would be trading on a PE ratio of 113.0x, assuming you use a discount rate of 9.3%.
• Given the current share price of ₩124100.0, the bearish analyst price target of ₩60000.0 is 106.8% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.