The author is an analyst of NH Investment & Securities. He can be reached at minwoo.ju@nhqv.com. — Ed.
EcoPro BM is forecast to report 2023 sales of W9.9tn (+86% y-y) and OP of W664.9bn (OPM of 6.7%).
Negative factors in 2023 to be offset by positives
We maintain a Buy rating and TP of W150,000 on EcoPro BM. In 2023, two negatives (decreased ASPs and power tool demand) and two positives (higher demand from Ford and BMW) are to be in play. Having peaked at US$90/kg in Nov 2022, the price of lithium has now fallen to the low US$70/kg-range. We expect the price to stabilize downward to US$60/kg by end-2023. As a result, cathode material ASP is to drop from about US$60/kg at end-2022 to US$50/kg at end-2023. Meanwhile, estimated to account for 38% of the firm’s 2022 sales, power tool demand is to slow amid construction industry deterioration.
However, such negatives are to be offset by trickle-down effects from Ford and BMW’s EV sales expansion. At Ford, annual production capacity for the F-150 Lightning is set to climb from 40,000 units in 2022 to 150,000 units by 3Q23, and as a result, shipments to Ford should jump significantly from 2Q23. In addition, BMW suggests that BEV sales will account for 15% of its overall sales in 2023 (360,000 units, +67% y-y)—a level which should be achievable given the solid demand for premium EVs and the effects of a recent new model (i5) launch. Customer diversification is also progressing smoothly, leaving open the possibility of further upward revisions to earnings estimates.
1Q23 preview: EV demand↑, power tool demand↓
On a consolidated basis, EcoPro BM logged 4Q22 sales of W1.94tn (+286% y-y, +24% q-q) and OP of W97.0bn (+253% y-y; OPM of 5.0%), with sales beating consensus by 8% but OP missing the mark by 20%. While ASP remained similar q-q, shipments jumped by over 20% q-q. Profitability came in sluggish, affected by: 1) narrowing spreads related to metal prices; 2) initial operating costs for CAM5N and CAM7; and 3) provisioning for incentives.
We expect 1Q23 sales of W2.0tn (+207% y-y, +4% q-q) and OP of W81.3bn (OPM of 4.0%), with sales to top consensus by 15% but OP to fall short by 37%. ASP should slide 3% q-q, but shipment volume should climb 17% q-q. Although profitability will likely slow on spread narrowing stemming from forex rate and metal price effects, margin recovery is anticipated from 2Q23.
