Eugene Investment & Securities cut its target price for Sungeel HiTech (KOSPI: 365340), a South Korean battery-recycling specialist, from ₩94,000 to ₩51,000 — a reduction of 45.7% — in a report published on 21st August. The brokerage maintained its Buy recommendation.
A long-awaited return to profit
Sungeel HiTech reported revenue of ₩76.8bn and operating profit of ₩6.3bn for the second quarter of its fiscal year 2026 (ending June), announced on 14th August. Revenue rose 20.0% year on year, extending a run of growth to five consecutive quarters. More significantly, the company swung to an operating profit from a loss of ₩17.4bn in the same period a year earlier — its first profitable quarter in twelve.
The results comfortably beat market expectations. The consensus had forecast revenue of ₩74.7bn and operating profit of just ₩1.7bn; the actual operating profit exceeded that estimate by 272.4%. The operating margin improved by 35.5 percentage points, from -27.2% to 8.2%.
The turnaround is striking in context. Since 2023, Sungeel HiTech has suffered sustained losses driven by a prolonged downturn in the secondary battery (lithium-ion) industry. Annual operating losses totalled ₩8.3bn in 2023, ₩71.4bn in 2024, and ₩54.5bn in 2025, bringing cumulative losses to ₩134.2bn. Against that backdrop, analysts caution that a single profitable quarter does not yet confirm a structural recovery.
Saemangeum Plant 3 drives the improvement
The primary catalyst for the turnaround was a rise in the utilisation rate at Saemangeum Plant 3, the company's most efficient facility. By securing a stable supply of black mass (BM) and black powder (BP) — the key raw materials in battery recycling — from Europe and North America, and by adding new customers, the plant's utilisation rate climbed from approximately 85% in the first quarter to 95% in the second. Improved cost structures at the higher-capacity plant were the main driver of the margin recovery.
Outlook: record revenues forecast
Eugene Investment & Securities projects third-quarter revenue of ₩87.1bn — which would be a record high, representing growth of 98.8% year on year — and operating profit of ₩7.2bn. The resumption of operations at Hydro Centre Plant 2 is expected to provide additional revenue momentum. For the full year 2026, the brokerage forecasts revenue of ₩318.0bn and operating profit of ₩21.7bn, with the company returning to annual profitability for the first time in years. In 2027, it projects revenue of ₩420.7bn and operating profit of ₩34.5bn.
Why the target price was cut so sharply
The steep reduction in the target price warrants scrutiny. Eugene Investment & Securities applied a 33% discount to the peer-group average 12-month forward EV/EBITDA multiple, citing concern about whether the improvement in utilisation rates can be sustained. In other words, even as the company returned to profit, analysts treated the durability of that recovery as a meaningful source of uncertainty.
Valuation metrics reinforce that caution. Based on forecast 2026 earnings, Sungeel HiTech trades at a price-to-earnings ratio of approximately 1,250 times — a figure rendered almost meaningless by net profit of only ₩1.2bn. The 2027 forward PER of 18.5 times looks more reasonable, and indeed falls well below the sector average of 66.8 times. The price-to-book ratio of 3.5 times for 2026 sits between that of peers EcoPro BM (6.6 times) and Cheonbo (1.1 times). A further risk worth monitoring is the company's heavily leveraged balance sheet: net debt stands at 318% of equity.
Share price and upside
The stock closed at ₩34,500 on 20th August, down 48.1% over the preceding six months, though it has rebounded 15.6% over the past month. Against the new target price of ₩51,000, that implies potential upside of roughly 47.8%.
Whether that upside is realised will depend on two factors above all: the company's ability to achieve full utilisation at Saemangeum Plant 3 and to bring Gunsan Plant 2 back on line in the second half of the year, and the pace at which global demand for electric-vehicle batteries recovers. Both remain uncertain.