South Korea’s battery stocks rise again after Tesla shares surge

2023.05.24 14:14:01 | 2023.05.24 14:16:38

LG Energy Solution Ltd. logo [Courtesy of LG Energy Solution]이미지 확대

LG Energy Solution Ltd. logo [Courtesy of LG Energy Solution]



Battery stocks are gaining ground again in the South Korean stock market as shares of Tesla Inc. recently rose in the U.S. market. While there are no doubt about the potential of these shares, concerns are rising that they are rising at a fast pace.

Shares of LG Energy Solution Ltd., the world’s second-largest battery maker for electric vehicles, rose 2.5 percent on Tuesday, Samsung SDI Co. gained 1.43 percent and POSCO Future M Co. 3.09 percent. In the secondary Kosdaq market, battery material stocks also gained with EcoPro BM Co. climbing 2.96 percent, EcoPro Co., the parent company of EcoPro BM, 0.53 percent and L&F Co. 5.18 percent.

Given that shares of Samsung Electronics Co. and SK hynix Inc. fell slightly and other industry stocks remained almost flat, battery stocks practically led the market, driven by improved investor sentiment after electric vehicle-related stocks led by Tesla soared on the New York Stock Exchange overnight.

Tesla shares climbed 4.85 percent to $188.87 on Monday local time, continuing its upward trend for five consecutive trading days. Other electric vehicle companies also saw their shares rally, with Nikola Corp. climbing 7.16 percent and Rivian Automotive Inc. 5.64 percent.

As domestic battery stocks, which were perceived as overvalued, have rallied again, controversy over whether their stocks are at an appropriate level is rising again. “No matter how clearly their performances can be anticipated three to five years from now, it seems excessive for stock prices to quadruple or more in a short period of time,” said an unnamed financial investment industry official. “The recent decline in battery stocks is a natural correction process.”

Kim Tae-hong, chief executive officer of Growth Hill Asset Management, on the other hand, noted that cathode materials companies are accelerating their capacity expansion while securing orders worth at least tens of trillions of won. “We are not in a stage to worry about a decline in their profit growth,” he said.

Kim Hyun-soo, an analyst at Hana Securities Co., also raised the possibility that domestic battery companies will achieve a long-term growth due to strengthening environment-friendly policies in the U.S. and Europe and restrictions facing Chinese companies in entering the U.S. market.

Experts also raised the need for a selective approach to battery stocks considering the level of their gains in a short period of time. In fact, foreign investors seem to be using this strategy. Foreign investors bought a net 28.8 billion won ($21.9 million) worth of LG Energy Solution shares on Tuesday, the largest among all stocks. They also increased their purchases of L&F shares to 27.4 billion won. On the other hand, they were net sellers of POSCO Future M, EcoPro and EcoPro BM shares.

Some even suggest that investors should pay attention to cathode material companies’ precursor production capabilities as precursors are in short supply. “At a time when the domestic battery industry is dedicated to stabilize the supply of precursors, stocks that can add these value to corporate value are perceived to have sufficient room to rise further,” said Kim.

Meanwhile, EcoPro BM announced after the market close that it would invest 473.2 billion won in its plant in Pohang, south of Seoul, to expand its production of cathode active materials.

By Kang Min-woo and Yoon Yeon-hae

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