Analysts recommend caution for soaring EcoPro stocks

An EcoPro BM building in Pohang, North Gyeongsang [YONHAP]

EcoPro stocks just might be the stock of the year so far, but analysts are wary of the overheating prices.

The battery maker’s stock price has soared 332 percent so far this year to close at 475,000 won ($361) Tuesday. Its cathode producer affiliate EcoPro BM jumped 140 percent to close at 224,500 won, and its green solutions provider EcoPro HN rose 63 percent to close at 73,300 won over the same period.

Market bellwether Samsung Electronics’ stocks climbed 14.6 percent over the same period.

The combined market cap of EcoPro and EcoPro BM, the two largest Kosdaq companies, was some 11.9 trillion won in January; it grew to almost 34.8 trillion won in March, surpassing Kospi's No. 9 Naver with 33 trillion won and falling short of No. 8 Hyundai Motor with 39 trillion won. EcoPro HN is 1.17 trillion won in market size.

The EcoPro family’s surge in stock price and market size was spurred by the buying spree from retail investors.

EcoPro and EcoPro BM were the top two most-purcased stocks by investors in March. Investors bought 921 billion won of EcoPro and 726 billion won of EcoPro BM. The third most bought stock in March was Posco Holdings, at around 505 billion won.

Foreign and institutional buyers are taking a step away from the EcoPro craze.

Foreign investors sold 569 billion won of EcoPro and 358 billion won of EcoPro BM. Institutions sold 368 billion won of EcoPro and 375 billion won of EcoPro BM.

Analysts are taking note of the warning signs.

Morgan Stanley rated EcoPro BM “underweight” in its investment outlook Thursday, setting the target price at 130,000 won, down 42 percent from the end price in March. The U.S. investment bank acknowledged EcoPro BM’s strong presence in the high-nickel cathode market, having key local clients such as Samsung SDI and SK Innovation, but was skeptical of its price valued higher than its clients.

Seoul-based Eugene Investment and Securities also lowered its investment opinion to “hold” from “buy” for the cathodes manufacturer, proposing a target price of 200,000 won.

“The current EcoPro-related events remind me of the Celltrion rally [in 2017], which was also led by retail investors,” said a spokesperson for a private equity fund that runs long-short funds.

“Though the EcoPro fad may last a while as Celltrion did, it’s a risky rally that can break at any time.”

BY KIM YEON-JOO, SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]