Boost 2022 Sales Forecast by 16%
The author is an analyst of NH Investment & Securities. He can be reached at minwoo.ju@nhqv.com. -- Ed.
We raise our 2022 sales forecast for EcoPro BM by 16% to reflect an earlier-than-expected start of operations at CAM6. As changes in earnings estimates for 2024 (the base year for our TP calculations) are insignificant, we leave our TP unaltered.
Customer’s pendulum speeding up
We maintain a Buy rating and a TP of W800,000 on EcoPro BM. Favorably reflecting the advancement of a major client’s 2022 plans, we have made upward revisions to 2022 earnings projections. But, as changes in earnings estimates for 2024 (the base year for our TP calculations) are insignificant, we leave our TP unadjusted. Our TP is based upon a target multiple of 25.0x (10% discount to average multiple of past three years) and 2024 EBITDA of W779.4bn, and it reflects end-2021E net debt of W240.3bn. The number of shares used in our calculations reflects 1mn warrants exercised on Dec 22 and a planned rights issue of around W400bn scheduled for 1H22 (assuming 1mn shares) (refer to Dec 23 announcement).
Boost 2022 sales forecast by 16%
We estimate consolidated 4Q21 sales of W525.8bn (+113.0% y-y) and OP of W38.3bn (+166.2% y-y), with sales to top consensus by 21% but OP to miss by 5%. Operations at the CAM6 plant (Samsung SDI JV), which had been scheduled to begin in 1Q22, started last month—as such, 4Q21 sales will likely prove better than previously forecasted, but we believe margins will show a temporary dampening due to depreciation expenses. We believe that the reason why the CAM6 operations were advanced was demand from BMW for early supply. Of note, BMW has announced plans to expand its production labor force by 5% as the initial volume of its recently launched EV models (iX, i4) has sold out. Due to the earlier-than-scheduled start of operations at CAM6, we have boosted 2022F sales (W2.9tn) by 16% and 2022F OP (W280.5bn) by 13%, exceeding the market projections by 25% and 26%, respectively.
Although the upward revisions to 2022F earnings represent a positive, potential upward revision of our TP will require an increase in earnings projections for 2024, the base point for calculating our TP. Scenarios for such would be: 1) earlier-than-expected start of operations in Europe (operations currently slated to begin in 2024) and the US (2025); or 2) upward revisions to earnings estimates stemming from the addition of new capacity; or 3) OPM coming to exceed the 10% mark on improved productivity.