[Click eStock] "L&F, Performance Improvement Starts in Q2... Target Price Down"

Target Price Lowered by 8% from Previous Level

KB Securities on the 6th downgraded the target price of L&F from 120,000 KRW to 110,000 KRW, anticipating that losses will continue through the first quarter of this year. The investment rating was maintained as 'Buy.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is due to the slowdown in the growth of the upstream market and weak demand, which led us to revise the 2025 operating profit estimate from 40 billion KRW to an operating loss of 42 billion KRW."

L&F's fourth-quarter results last year showed sales of 365.4 billion KRW, down 44% year-on-year, and an operating loss of 149.8 billion KRW, falling short of consensus (average securities firm forecast). The researcher analyzed, "After strong inventory adjustments in the third quarter, shipments to Tesla partially recovered, leading to a rebound in overall shipments, but an inventory valuation loss of 47.6 billion KRW occurred due to the decline in lithium prices. In addition, the start of operations at the Guji 3 plant and low overall operating rates increased fixed cost burdens, and the impact of low-priced sales of the NCM523 product, which uses expensive raw materials, further deteriorated profitability."

Profitability is expected to remain weak through the first quarter of this year. KB Securities forecasts L&F's first-quarter sales to decline 40% year-on-year to 382.5 billion KRW, with an operating loss of 76.5 billion KRW, indicating continued losses. The researcher said, "The rebound in sales volume will be limited due to delays in the sales of the NCMA95 product," adding, "Profitability weakness is inevitable as inventory valuation losses and losses related to NCM523 continue."

From the second quarter, performance improvement is expected to accelerate. The researcher predicted, "L&F's quarterly operating profit margin this year will rapidly improve from -20% in the first quarter to -0.5% in the second quarter, 2.2% in the third quarter, and 3.4% in the fourth quarter. This is because inventory valuation losses due to the decline in lithium prices and losses related to NCM523 are expected to be finalized in the first half of the year, and shipments of the NCMA95 product for the Model Y facelift will begin in earnest from the second quarter, significantly reducing fixed cost burdens."