[Click eStock] "L&F Focuses on Strengthening Fundamentals and Defending Profitability"

LNDF is expected to focus on strengthening its fundamentals and defending profitability this year. It is anticipated to minimize capital expenditure while also reducing the proportion of low-margin products.

On the 21st, Heungkuk Securities maintained a 'Buy' rating and a target price of 120,000 KRW for LNDF, citing these reasons. The closing price on the previous day was 90,900 KRW.

Heungkuk Securities forecasted that LNDF will reduce losses from the first quarter of this year and escape the performance trough. The expected first-quarter results are sales of 389.2 billion KRW and an operating loss of 103.8 billion KRW. They expect the losses to decrease compared to the same period last year. Thanks to the effect of new car launches by clients and strong electric vehicle sales in Europe, shipments from LG Energy Solution (China) and SK On (Europe) are expected to increase by about 10% compared to the previous quarter.

However, the fixed cost burden from the newly operating Guji3 plant remains, and considering price declines, operating losses are expected to be only slightly reduced. Shipments of N95 products for Tesla's new Model Y will start impacting from the first quarter of this year, but significant performance contributions are expected in the second quarter when deliveries begin in the European region.

Accordingly, LNDF is expected to focus on defending profitability in line with changes in the demand environment this year. First, it will optimize production capacity by maintaining inefficient aging facilities and partially operating the new plant. Through this, capital expenditures will be minimized to around 1% of annual sales, with investments focused on facility maintenance. Meanwhile, the expansion of high-nickel sales proportion is also expected to improve the product portfolio.

Jinsoo Jung, a researcher at Heungkuk Securities, explained, "Assuming Model Y sales of 180,000 units, about 19,000 tons of N95 will be shipped, which will reduce the proportion of low-margin N50 products to the low 20% range. Under an optimistic environment for cylindrical battery demand led by Tesla, the recovery of performance is expected to be robust."