Samsung SDI tops LG Chem in market cap amid GM recall crisis

Samsung SDI Co. has become South Korea’s top battery maker in terms of market capitalization. The company is now ranked as the sixth-largest firm on Kospi surpassing its long-time rival LG Chem Ltd. for the first time since 2007.

Samsung SDI closed the last trading day of August at the price of 793,000 won ($685.44) a share. Its market cap was 54.5 trillion won ($47.1 billion) beating LG Chem at 53.5 trillion won ($46.2 billion) by one trillion won.

Foreign investors made a net purchase of 80.5 billion won ($69.6 million) in Samsung SDI shares on Aug. 31, whereas they made a net sale of 84.4 billion won ($72.9 million) in LG Chem. The domestic institutional investors also sold 42.1 billion won ($36.4 million) worth of LG Chem shares on the same day.

Not many investors expected that Samsung SDI will ever surpass LG Chem in market cap. By the end of the second quarter, LG Chem’s market cap, at 60 trillion won ($51.9 billion), was about 13 trillion won ($11.2 billion) larger than that of Samsung SDI.

But LG Chem’s stock price has made a sharp 15% drop over the last 11 trading days after the vehicles of its clients, namely GM’s Bolt EV and Volkswagen’s ID.3, were on fire recently.

“Investors seem to have pulled out of LG Chem to buy shares of Samsung SDI and SK Innovation,” said an asset manager.

Samsung SDI’s shares are trading at a price 30% higher than early June. The hike was largely driven by the announcement in late July during the earnings call that the company will build new battery plants in the US.

“It is inevitable to have production of EV parts in the US due to the US-Canada-Mexico Trade Agreement (USMCA), which will take effect in 2025,” said Samsung SDI during the earnings call. The new trade deal requires at least 75% of car’s components to be manufactured in North America to be exempted from tariffs.

Another pull factor of Samsung SDI is that unlike its rivals LG Chem and SK Innovation Co., it has no plans yet to spin off its battery-making unit into a separate legal entity.

“As most LG Chem and SK Innovation investors must have bought their shares looking at the growth of the battery sector, the planned spin-offs of their battery units are negative news,” said a securities industry official.

Some project that Samsung SDI will surpass LG Chem in terms of EBITDA this year, as LG Chem must book losses from payments related to the battery fires. According to Hyundai Motor Securities Co., Samsung SDI’s EBITDA this year will be 2.4 trillion won ($2.1 billion) and is projected to grow to 3 trillion won ($2.6 billion) in 2022.

Hyundai Motor Securities also noted that Samsung SDI’s cash flow is stable enough to expand its production capacity by 20GWh annually even without external funding.

Samsung SDI, with its battery business having made a positive turnaround in the second quarter, is expected to post an operating profit of 1.17 trillion won ($1.01 billion) this year according to the financial data company FnGuide Inc., up by 74% versus last year.

FnGuide projected that Samsung SDI’s operating profit in 2022 will reach 1.56 trillion won ($1.35 billion), about 33% higher than its projection for this year.

Write to Ui-myung Park and Euo-seo Koo at uimyung@hankyung.com
Daniel Cho edited this article.