[비즈한국] EcoPro086520 Group experienced its worst performance slump last year, and the outlook for this year remains dim. This is due to stagnant demand for electric vehicles (EVs) and the rapid rise of Chinese battery manufacturers. Of course, the outlook is not entirely negative. The EcoPro Group operates a large-scale factory in Pohang, and recently, Democratic Party presidential candidate Lee Jae-myung announced plans to develop the area around Pohang into a core hub for the secondary battery supply chain. Meanwhile, some are calling for the return of former EcoPro Group Chairman Lee Dong-chae to the board of directors to facilitate faster decision-making.
Recent Performance Slump
Entering the 2020s, the EcoPro Group gained significant attention as a "leader in secondary battery stocks." Its subsidiary, EcoPro BM247540, manufactures cathode materials, the core component of secondary batteries, while EcoPro Materials450080 produces precursors, the key raw material for cathodes.
EcoPro BM's revenue skyrocketed, rising from 1.4856 trillion won in 2021 to 5.3576 trillion won in 2022 and 6.9009 trillion won in 2023. Consequently, its stock price also surged. While EcoPro BM's stock price remained under 100,000 won in 2022, it rose to as high as 584,000 won in 2023.
However, EcoPro BM's growth hit a plateau starting last year. Revenue fell by 59.91%, from 6.9009 trillion won in 2023 to 2.7668 trillion won in 2024. After posting an operating profit of 156 billion won in 2023, the company shifted to an operating loss of 34.1 billion won in 2024. The current stock price hovers around the 100,000 won level, significantly lower than in 2023.
In the first quarter of this year, EcoPro BM recorded 629.8 billion won in revenue and 2.3 billion won in operating profit. EcoPro BM stated, "Revenue increased by 35% compared to the previous quarter (Q4 2024), and we succeeded in turning an operating profit," adding, "Considering that we recorded losses for three consecutive quarters last year, this Q1 turnaround is significant as it breaks the chain of deficits."
However, some argue that it is difficult to view EcoPro BM's performance as having improved significantly. While it is true that the Q1 results improved compared to Q4 of last year, they remain lackluster compared to the same period last year (Q1 2023). In Q1 of last year, EcoPro BM posted 970.5 billion won in revenue and 6.7 billion won in operating profit. Both revenue and operating profit for Q1 of this year fall short of the figures from Q1 last year.
The situation for EcoPro Materials is not much different. Its revenue dropped by 68.52% from 952.5 billion won in 2023 to 299.8 billion won in 2024. Operating profit shifted from 8.8 billion won in 2023 to an operating loss of 64.7 billion won in 2024. It continues to report losses, including an operating loss of 14.8 billion won in the first quarter of this year.
This performance slump is interpreted as being influenced by the "EV chasm" phenomenon. The chasm refers to a temporary slowdown in demand. Immediately, Hyundai Motor Company's domestic EV sales dropped by 27.71%, from 60,592 units in 2023 to 43,802 units in 2024.
EcoPro HN383310, an eco-friendly total solution company, is also facing a difficult situation. Revenue decreased by 33.15% from 51.5 billion won in Q1 of last year to 34.4 billion won in Q1 of this year, while operating profit fell by 53.56% from 7.3 billion won to 3.4 billion won during the same period. The poor performance is particularly painful as EcoPro HN is supposed to lead the EcoPro Group's new business ventures.
Is There a Breakthrough?
Evaluations suggest there is high uncertainty regarding the EcoPro Group's future performance. Above all, the rapid rise of Chinese battery companies is a source of anxiety. Lee Yong-wook, an analyst at Hanwha Investment & Securities, analyzed EcoPro BM, stating, "While sales volume is increasing quarterly due to restocking demand from downstream automakers, it is expected to fall short of original expectations. This is because the proportion of Chinese batteries in Europe is increasing, it is difficult to expect short-term EV sales promotion policies in Europe and the U.S., and there is a lack of new car cycles for the time being."
Some analyze that the current international and political situation could be a variable. On April 18, Democratic Party presidential candidate Lee Jae-myung stated on social media (SNS), "I will foster Daegu, Gumi, and Pohang as key hubs for the global secondary battery supply chain," adding, "I will support the strengthening of R&D capabilities for next-generation solid-state batteries and recycling by utilizing industrial foundations."
Coincidentally, the EcoPro Group operates a Pohang campus in the city. The Pohang campus consists of four sites. Pohang Campus 1 and 2 house EcoPro BM and EcoPro Materials, respectively. EcoPro EM, EcoPro Innovation, and other EcoPro Group affiliates are located at Pohang Campus 3, where they produce products.
Pohang Campus 4 is scheduled for completion in 2026. The EcoPro Group explained that once completed, the Pohang campus will become a massive secondary battery industrial complex producing 270,000 tons of cathode materials, 110,000 tons of precursors, and 26,000 tons of lithium hydroxide. If candidate Lee Jae-myung is ultimately elected president, the EcoPro Group can expect government support.
However, there are strong arguments that policy support has its limits. This is because policy support alone is not enough to gain an edge in competition with Chinese battery companies. Chinese firms possess high price competitiveness based on low labor costs. Because of this, the performance of not just the EcoPro Group, but major domestic battery-related companies, is not what it used to be.
The EcoPro Group has a relatively low presence in the U.S. market. Of EcoPro BM's 2.7668 trillion won in revenue last year, income generated in the U.S. was only 66.3 billion won, or 2.4%. With U.S. President Donald Trump strongly keeping China in check, the company is effectively not at a disadvantage against Chinese competitors in the U.S. For this reason, the securities industry suggests that the EcoPro Group should increase its presence in the U.S. market.
EcoPro's major clients include SK On and Samsung SDI006400. SK On and Samsung SDI have been actively pursuing the North American market, including by establishing joint ventures with local U.S. firms. If EcoPro expands its supply chain in the U.S. market, it could create synergy with them. Jung Won-seok, an analyst at iM Securities, noted, "Competition between domestic firms and Chinese companies that prioritize high technology and low prices is intensifying. For EcoPro BM, it is a crucial time to expand the proportion of sales toward North America, which strongly keeps the Chinese battery industry in check."
EcoPro is aware of this and is formulating its own management strategy. An EcoPro official said during the Q4 2024 earnings call in February, "We believe we can maintain a relative advantage over Chinese companies in the U.S. market," adding, "As we pursue nickel smelting projects in Indonesia, we are creating a partnership structure that can flexibly respond to pressure against China. This strategy is expected to be useful in the precursor business, where our clients have a high reliance on China."
On the other hand, there are calls for the management return of former EcoPro Group Chairman Lee Dong-chae. Former Chairman Lee Dong-chae was sentenced to two years in prison in August 2023 for violating the Capital Markets Act. After being released through a special Liberation Day pardon in August of last year, he returned to the company as an executive advisor in September.
Some in the business world suggest that former Chairman Lee Dong-chae should return as chairman or join the board of directors. The reason is that without him, final decision-making at EcoPro is difficult to carry out quickly. As he serves as an executive advisor but is not a member of the board, there are limits to his participation in management. When asked about his return to management at the 'InterBattery 2025' event in March, former Chairman Lee replied, "I am contemplating for the future of EcoPro." He avoided a direct answer regarding the timing of his return to management.