Shares of South Korea’s three leading electric vehicle battery makers surged Tuesday, on strong electric car sales in Europe and expectations that a Biden win in the US election will stir up the EV industry.
The battery trio’s business growth is expected to accelerate next year on a global adoption of environmentally friendly vehicles, raising hopes of further upside potential for battery stocks.
LG Chem Ltd., the world’s largest EV battery maker, finished up 5.3%, the biggest percentage gain in two months, at 656,000 won on Nov. 3, while Samsung SDI Co. shares rose 4.4% to 459,500 won. Shares of the day's leader, SK Innovation Co., climbed 7.35% to close at 131,500 won.
Foreign investors and local institutions bought a combined 340 billion won ($300 million) worth of shares in the three battery makers on Tuesday.
Analysts said the robust sales data from European EV makers trigged the trio’s stellar share performance.
Electric car sales in France rose 128% to 14,000 units in October from the same month a year earlier. Data showed Norway’s EV sales more than doubled to 7,873 units in the cited period, while Italy’s EV sales surged 205% to 2,889 units.
“European automakers will need to increase the ratio of electric vehicles in their auto sales to meet tighter emission regulations,” said KB Securities analyst Baek Young-chan.
KOREAN WINNERS IN US VOTE
Korea’s green energy stocks are widely seen as key beneficiaries if Joe Biden is elected US president.
Both US candidates have said they support electric vehicles, but a Biden win could significantly speed up the adoption of cars and trucks built by the likes of Tesla Inc.
Biden’s plan for the EV industry includes building more than a half million charging stations by 2030, restoring the full EV tax credit and instituting stricter regulations that would encourage the use of electric-powered autos. President Donald Trump is expected to maintain the status quo, including loosening fuel emission standards and building fewer charging facilities.
“A growing market view is that the US is lagging behind China in the EV industry. No matter who wins the US presidential election, the new president will be asked to grow its EV battery business at a faster pace,” said a battery industry official.
Last week, LG Chem’s shareholders voted in favor of the plan despite opposition from some investors, who feared the split-off would weaken the value of their shareholdings.
“The battery industry’s growth potential is getting investor attention again now that the controversy over LG Chem’s battery spin-off is over,” said a BNK Asset Management executive.
LG Chem’s shares were also boosted by market talk that new entity could be headed solely for a Nasdaq listing instead of going public on the Korean bourse.
LG Chem executives said in September the company may list the new company, LG Energy Solutions, on the Korean stock exchange to raise cash for a large-scale investment in the battery business. A dual listing on local and foreign exchanges is also possible, they said.
“If LG Chem decides to list the new company only on an overseas stock exchange, it could ease investor concerns over share value dilution,” said an official at a local securities firm.
FASTER GROWTH PACE
Analysts expect the EV battery market to grow at a faster pace in 2021, raising hopes for better earnings for the three Korean battery makers.
According to market researcher FnGuide, LG Chem’s operating profit is forecast to climb 176% to 2.47 trillion won this year, and rise 35% to 3.33 trillion won in 2021.
Samsung SDI’s operating profit is projected to rise 1.45 trillion won in 2022 from an estimated 1.18 trillion won in 2021.
SK Innovation, basically an oil refining company and a latecomer to the EV battery market, is expected to post an operating loss of 2.31 trillion won this year, hit by the COVID-19 pandemic impact on its refining and petrochemical businesses.
But many analysts expect the company to swing to a profit in 2021.
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