Battery Leaders, Why Are Their Stock Prices Stagnant Despite Record Earnings?

Expected to Gradually Recover in Q4

[Asia Economy Reporter Song Hwajeong] Although the leading battery companies recorded surprise earnings in the third quarter of this year, their stock price movements have fallen short of expectations. Since strong performance is also expected in the fourth quarter, stock prices are projected to gradually recover.

As of 10:13 AM on the 28th, LG Chem was trading at 628,000 KRW, down 0.63% (4,000 KRW) from the previous day. Samsung SDI also showed a decline of 0.35%.

Samsung SDI announced yesterday that its third-quarter sales reached 3.0872 trillion KRW, with an operating profit of 267.3 billion KRW. These figures represent increases of 61.1% and 20.22%, respectively, compared to the same period last year. It achieved the highest quarterly sales ever, and operating profit exceeded consensus estimates. So Hyuncheol, a researcher at Shinhan Financial Investment, analyzed, "The sharp increase in sales of Samsung Electronics' smartphones and TVs significantly improved the performance of the small battery and electronic materials divisions," adding, "With the full-scale sales of batteries to European automobile customers, the automotive battery division turned profitable."

LG Chem also recorded its highest quarterly performance in the third quarter. LG Chem posted sales of 7.5073 trillion KRW and an operating profit of 902.1 billion KRW in the third quarter. Sales increased by 8.8% and operating profit by 158.7% compared to the same period last year.

Despite these strong earnings, stock prices remain sluggish. Since the beginning of this month until the day before, Samsung SDI's stock fell by 0.81%, and LG Chem's by 3.36%. Due to adjustments following a sharp rise in the first half of the year, LG Chem's correction has been prolonged amid various negative factors. Samsung SDI's stock price has dropped 15.52% from the 52-week high recorded in early August, and LG Chem's has fallen 19.49% from its 52-week high in August. Lee Sunhak, a researcher at Hanwha Investment & Securities, analyzed, "Stock price adjustments occurred among battery companies after Tesla's Battery Day," explaining, "This was because Tesla's cost reduction targets were larger than expected." LG Chem's stock price was further dragged down by uncertainties such as recent electric vehicle fires, battery business spin-offs, and litigation risks.

Strong performance is expected to continue not only in the fourth quarter but also into next year, so once uncertainties are resolved, stock prices are likely to rebound. Researcher So said, "Samsung SDI's mid-to-large batteries are driving performance, and the company's operating profit for the fourth quarter is estimated to increase by 22.1% from the previous quarter to 326 billion KRW, exceeding the consensus of 291.8 billion KRW, which is expected to be an earnings surprise." Park Yeonju, a researcher at Mirae Asset Daewoo, forecasted, "LG Chem's operating profit in the fourth quarter will remain at a high level of 900.4 billion KRW," adding, "The transition in the electric vehicle market and margin expansion of leading battery companies are just beginning, and concerns will gradually be resolved over time."