[Into the Stock] L&F's Corporate Value in a 'Golden Age'... Executives Realize Gains

Electric Vehicle Battery Component Demand
Operating Profit Expected to Increase 20-Fold This Year
Facility Investment Rises, Debt Also Increases
Capital Increase Executed to Secure Expansion Funds
Six Executives Sell Shares on Market

[Asia Economy Reporter Ji Yeon-jin] L&F, a secondary battery material company, has seen its corporate value more than double this year. As the electric vehicle era fully opens, the demand for battery components has increased, raising expectations for record-breaking performance and driving the stock price sky-high. Although the stock price recently paused due to concerns over early tightening in the U.S., experts believe the company's value will continue to rise. However, the rapid increase in debt and soaring financial costs, along with executives selling company shares to realize profits during the stock price surge, pose concerns.

◆ Unstoppable Momentum = L&F produces cathode active materials, a core component of batteries used in smartphones, laptops, and electric vehicles. It supplies cathode materials to electric vehicle battery manufacturers LG Energy Solution and SK Innovation. With the explosive growth in electric vehicle sales, its performance has significantly increased since this year. Sales in the first half of this year reached 349.9 billion KRW, already catching up to last year's full-year sales of 356.1 billion KRW. Operating profit turned positive in the second quarter and is expected to exceed 30 billion KRW this year, more than 20 times last year's 1.5 billion KRW.

Thanks to this, the stock price has continuously trended upward since the COVID-19 crash last year. It rose even more steeply from July and surged this month, supported by net buying from foreign investors despite the ongoing bear market. Foreign investors have purchased L&F shares for seven consecutive trading days since the 10th of this month. The three-month return is 91.17%, with a 51.38% increase this month alone. On the 24th, when the stock hit its yearly high, the company's market value soared to 6.5837 trillion KRW, ranking third in KOSDAQ market capitalization. This is due to the start of a second large-scale cathode material order cycle, with projections that the cathode materials for Tesla electric vehicles alone will reach 5 trillion KRW.

Brokerages have been raising their target prices, averaging close to 200,000 KRW. Mirae Asset Securities raised its target to 260,000 KRW on the 24th. As of 2:20 PM that day, the stock was trading at 181,500 KRW, up 3.48% from the previous day. After a sharp drop over two days following the spread of U.S. tightening concerns on the 27th, the stock price has rebounded.

◆ Stock Price Taking a Breather, Is This a Buying Opportunity? = L&F has recently expanded its facility investments significantly, causing a sharp increase in debt. Operating profit in the first half of this year, which recorded performance comparable to last year, was 2.4 billion KRW, down from 4 billion KRW in the first half of last year. This is due to financial costs (loan interest) rising more than threefold from 4.9 billion KRW to 15.4 billion KRW during this period. Debt jumped from 235.6 billion KRW last year to 526.2 billion KRW in the first half of this year. L&F conducted a paid-in capital increase worth 477.1 billion KRW this year. Kim Hyun-soo, a researcher at Hana Financial Investment, said, "Securing funds for expansion through this capital increase and improving visibility for future sales growth is positive," adding, "The debt ratio is also expected to significantly decrease through this capital increase."

Contrary to the positive outlook from brokerages, insiders at the company are realizing profits. Executive Director Jang Mo sold 3,000 shares on the market at 155,700 KRW per share on the 17th, and six executives have sold company shares this month.