2Q miss on delayed EU EV demand; Hungary ramp weighs; reiterate U/P

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Ecopro BM

2Q miss on delayed EU EV demand;

Hungary ramp weighs; reiterate U/P

Reiterate Rating: UNDERPERFORM | PO: 70,000 KRW | Price: 96,700 KRW

2Q miss; delayed demand in EU EV; Hungary fixed costs

01 August 2026

EBM posted 2Q OP of W18bn (-14% QoQ, -63% YoY; 3% OPM), missing

BofAe/consensus (W24bn/W27bn); mainly due to (1) weak cathode volumes (c.-10%

QoQ; UTR c.25%) as demand for the key product (e.g., SDI-BMW’s i4) was deferred

ahead of upcoming competing model launch (e.g., CATL-BMW’s i3 Neue Klasse) in EU,

while US EV projects remain dormant; (2) incremental fixed costs from the start-up of

Hungary line #1.

Equity

Highly exposed to SDI’s EU EV; tepid UTR

We see little scope for EBM’s sales diversification. EBM lacks LFP capabilities and

remains heavily dependent on SDI’s EU EV business, which is underperforming peers

despite solid EU EV demand (+28% YoY, vs SDI/SK -1%/0% YoY, vs LGES +13%, YTD).

We expect weakness in key products (e.g., SDI-BMW i4) through 1H27 ahead of BMW’s

i3 launch (CATL value chain), while fixed costs from Hungary line #1 (line switch from

Korea to Hungary, for HMG’s EU EV under TCA/IAA) weigh on margins. We estimate only

modest UTR gain to 27%/31% in ’26/27E and remain bearish on persistent overcapacity.

Upstream expansion via BNSI investment; remote benefit

EBM aims to incorporate earnings from the BNSI nickel smelter (c.W2tn sales, c.15%

OPM assuming US$20/kg Ni) via the equity method from 2027E. EBM also expects to

secure 20-37ktpa of Ni MHP through offtake agreements, equivalent to c.40-70ktpa of

cathodes (60-80% of 2027E shipments), including 18-35ktpa from BNSI and 2ktpa from

ESG. Over the longer term, this could mitigate metal-price volatility and support

compliance with non-PFE requirements. However, we see limited N-T benefits, while

continued capex spending ($5.1bn for BNSI) is likely to keep FCF negative in ’26-27E.

Reiterate Underperform rating; cut PO to W70,000

We reiterate Underperform, given (1) EU EV concentration coupled with little ESS

exposure (vs L&F primary supplier to US ESS with >70% SDI volumes secured by ’28E;

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