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| EcoPro BM's factory in Pohang / Yonhap |
By Lee Min-hyung
EcoPro shares extended a sharp rally on Tuesday on its surprising triple-digit earnings growth, but market experts advised investors to be aware of overvaluation risks in the Kosdaq-listed leading rechargeable battery maker's stock price.
According to the Korea Exchange, EcoPro's share price closed at 769,000 won, marking a robust rise of 6.51 percent. The rechargeable battery stock hit a historic high of more than 800,000 won at one point during trading hours on the same day.
Other EcoPro affiliates, such as BM, also enjoyed a winning streak on the rosy outlook for the global battery industry. EcoPro is the second-most-valuable firm by market capitalization in the secondary stock market. EcoPro and two of its affiliates have driven an eye-catching rally of the Kosdaq in the first quarter. The Kosdaq has achieved the world's largest growth this year, closing with a gain of 36 percent between the first trading day of 2023 and April 11.
However, analysts urged investors to stop engaging in a blind buying spree of EcoPro shares due to what appears to be an unstoppable sweeping upturn of its share price.
Major brokerage houses are also revising their outlooks on EcoPro shares from an earlier buy position to a hold position, due to lingering concerns regarding overvaluation. EcoPro is a holding company of EcoPro Group which consists of EcoPro BM, EcoPro HN and EcoPro Materials.
"Any holding firm's major cash cow is dividends they receive from their affiliates," Samsung Securities analyst Jang Jeong-hoon said. "Their valuation is also calculated by a discount rate of around 30 percent to 50 percent of their stock holdings of subsidiaries. But EcoPro shares appear to receive a premium of around 20 percent more than the value of its stock holdings."
Morgan Stanley also said recently that EcoPro BM's proper valuation should be cut in half from the current price level. The global investment bank presented a target stock price for EcoPro BM of 130,000 won per share. EcoPro BM closed Tuesday at 294,000 won, up 2,000 won or 0.68 percent from the previous trading day.
In a recent report, Morgan Stanley also said the company's latest stock rally looks too excessive, and urged the company to announce updates on suspicious internal trading.
Eugene Investment & Securities analyst Han Byung-wha also revised its investment opinion regarding EcoPro BM to a hold position, citing the overvaluation risk.
"The company's outlook still appears promising enough, but its stock price has risen too sharply, reflecting on its future earnings, so we still need more time to prove," the analyst said.
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