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Long-term potential deserves attention

Lower TP to W13,000

We lower our target price for W-Scope Chungju Plant (WCP) to W13,000 (from W19,000), applying a 50% discount to the P/B of competitor SK IE Technology (SKIET). We believe a discount is warranted due to the current survival-of-the-fittest market environment, which favors top-tier players/first movers. That said, WCP’s valuation has already fallen to around 0.3x P/B. If the company demonstrates earnings resilience and proves its viability as a latecomer, current levels could offer meaningful upside for medium/long-term investors.

We expect WCP to deliver gradual earnings improvement from 2026, supporting a normalization in its valuation. Key drivers of improvement will likely include: 1) a rebound in China’s domestic separator prices (amid the government’s campaign to ease overproduction/excessive price competition); and 2) the potential start of separator supply to Samsung SDI for ESS batteries.

Stabilizing separator prices in China

Signs are emerging that Chinese separator producers―whose aggressive output has fueled global oversupply―are starting to scale back production. In August, several leading Chinese separator names held a meeting concerning wet- and dry-process separator supply, during which they agreed to: 1) restrict sales below cost levels; and 2) suspend new capacity expansion plans for the next two years while focusing on improving efficiency at existing lines. Following the meeting, prices for 7μm and 9μm wet-process products began to rebound in early September. While the rebound is not yet strong enough to materially improve fundamentals, it nevertheless marks an exit from the extreme price down-cycle that has persisted over the past three years.

Aided by China’s campaign to address overcapacity and rebounding separator prices, peer P/Bs have started to recover (from 1.0x to 1.7x for Yunnan Energy New Material and from 0.7x to 1.1x for SKIET), but WCP’s P/B remains at around 0.3x, leaving it deeply undervalued.

Potential ESS-related volume growth

A recovery for WCP ultimately depends on Samsung SDI, its key customer. Demand trends for Samsung SDI’s EV and ESS batteries are currently moving in opposite directions, with ESS showing strong growth. For WCP, the start of separator supply for Samsung SDI’s North American ESS operations―which we think could materialize in 2Q26―is the key variable in terms of the pace and magnitude of a shipment/earnings recovery.