L&F shares: Further upside potential after tenfold gains

Shares of L&F Co., South Korea’s top battery materials maker, have risen tenfold in the past year and a half, but many analysts bet the stock is undervalued and has room to grow further.

On Thursday, the stock closed down 1.8% at 209,200 won in Seoul, reaching a market capitalization of more than 7.3 trillion won ($6.2 billion).

Foreign investors have particularly shown interest in the stock, doubling their combined share ownership to the 20% range in the past one a half years, much higher than local peers such as EcoPro BM Co. and POSCO Chemical Co., in which foreigners have 16% and 8% stakes, respectively.

The stock’s ascent has been sharp following its announcement in April that it clinched a 1.2 trillion won deal to supply battery materials to SK Innovation Co.

Industry officials expect L&F to continue to aggressively seek supply deals while expanding its facilities to meet growing demand from electric vehicle battery makers.

Some analysts doubt L&F’s current valuation as its 12-month forward price-earnings ratio (PER) is 90, much higher than EcoPro BM’s multiple of 68.

L&F’S TECHNOLOGY WARRANTS HIGH PER

However, others say the company’s technological prowess warrants such a high PER.

L&F is the only battery materials maker in the world that can mass produce NCMA (nickel, cobalt, manganese and aluminum) cathodes. The company is also capable of producing the NCM cathode, a type widely manufactured by other battery materials makers.

A growing number of electric vehicle makers around the world are adopting NCMA lithium-ion battery cells as they ensure a longer range, lower prices and contain less nickel and cobalt, expensive raw materials.

“LG Energy Solution and other battery makers will significantly adopt NCMA cathodes from next year to meet rising demand from automakers,” said Korea Investment & Securities analyst Kim Jung-hwan.

“L&F is well-positioned to benefit from the anticipated strong growth of the NCMA battery cells.”

LG Energy Solution is one of L&F’s major clients. With NCMA cathodes made by L&F, LG Energy supplies its batteries to Tesla.

In recognition of L&F’s technology, IMM Credit Solution, a subsidiary of Seoul-based private equity firm IMM PE, recently concluded 500 billion won in blind funding and named L&F as its first investment target.

Battery analysts are raising their target price for L&F to catch up with the company’s sharp share price gains.

Mirae Asset Securities Co recently raised its price target for L&F to 260,000 won, while Korea Investment & Securities raised its target price to 240,000 won.

Write to Yun-Sang Ko at kys@hankyung.com
In-Soo Nam edited this article.