Outlook for Korean battery shares evenly split amid weak performance

South Korea’s major battery makers, which have underperformed the broader stock market since the start of the year, remain opaque as fund managers are evenly divided over the sector's share price outlook.

According to a recent survey of local fund managers by The Korea Economic Daily, about 22.6% of the respondents said battery shares will face a correction in the 10-20% range in the coming months.

Nearly the same percentage of the fund managers polled said they expect the shares to rise by 10-20%, indicating that some investors remain hopeful in the wake of a series of negative news.

Korea’s three major battery players – LG Chem Ltd., Samsung SDI Co. and SK Innovation Co. – led the main Kospi market’s rally throughout 2020, but faced downward pressure alongside the weak performance of US electric car giant Tesla Inc.'s shares in the first couple of months of the year.

The Korean battery manufacturers were further hit by Volkswagen AG’s announcement in mid-March that it will make batteries in-house for its electric cars and switch its battery type in favor of Chinese manufacturers.

LG Chem, which owns Korea’s largest battery company LG Energy Solution Ltd., has shed 15% since Feb. 1, while Samsung SDI has dropped 12%. SK Innovation has fallen 35% in the same period.

BATTERY MATERIALS MAKERS EMERGE AS ALTERNATIVES

The pessimists said the Korean companies’ valuations will likely be lowered as they face an increasingly uphill battle with automakers entering the EV battery-making business.

But those who hold an optimistic view say the shares of the battery makers will likely stage a rebound from the second quarter on the back of improving profits.

Some fund managers recommended investors adjust their investment portfolios to include battery materials makers given fierce competition between conventional battery makers and EV automakers to secure battery materials.

Write to Bum-Jin Chun at forward@hankyung.com
In-Soo Nam edited this article.