[Click eStock] "L&F, Full-Scale Sales of Cathode Materials for Electric Vehicles Begin This Year"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 15th that L&F, a lithium-ion secondary battery cathode material company, raised its target stock price to 110,000 KRW, citing a high possibility of performance improvement due to the expansion of the secondary battery market.

L&F's Q4 performance showed sales of 103.2 billion KRW, a 22% increase compared to the previous year, but an operating loss of 1.4 billion KRW, falling short of market expectations. Sales of cathode materials for electric vehicle batteries exceeded 20 billion KRW for the first time, raising the sales proportion to over 20%, but the decline in the exchange rate negatively impacted the sales converted into Korean won. Additionally, depreciation expenses from the new expansion line were reflected, and increased cost of goods sold due to large-scale hiring in the manufacturing sector prevented a return to profitability. Annual depreciation expenses last year are estimated to have increased by 50% (about 5 billion KRW) compared to the previous year. Furthermore, the recent sharp rise in stock price caused a derivative loss of 10 billion KRW on convertible bonds, expanding the net loss beyond expectations.

However, Q1 performance this year is expected to show sales of 128.2 billion KRW, a 26% increase year-on-year, and an operating loss of 100 million KRW. The sales growth in the electric vehicle battery sector is expected to continue, and the new expansion line, which will be fully reflected in sales from the second half of the year, along with the associated increase in depreciation expenses, will maintain pressure, but profitability is expected to return from Q2. This year's performance is projected to show sales of 704.4 billion KRW (a 97% increase year-on-year) and operating profit of 22.2 billion KRW (a 1505% increase year-on-year), indicating a steep improvement in results.

Hyunsoo Kim, an analyst at Hana Financial Investment, said, "From Q3, new sales will increase significantly, and sales growth and profitability improvement will begin in earnest," adding, "The proportion of cathode material sales for electric vehicles rose sharply from '0' in 2019 to 66% in 2021 and 77% in 2022, and the high-growth ESS sales proportion also accounted for 19% in 2022, making it the secondary battery material company with the highest 'electric vehicle + ESS' sales exposure."