[Click e-Stock] L&F Expected to Return to Profit After Two Years... Target Price Raised

Target Price Raised by 19% from Previous Level

On July 31, KB Securities raised its target price for L&F from 80,000 won to 95,000 won, projecting that the company will return to profitability in the third quarter of this year for the first time in two years. The investment opinion remains 'Buy'.

Lee Changmin, an analyst at KB Securities, explained, "The reason for raising the target price is that we have confirmed a rebound in shipment volumes centered on major clients. Therefore, we have raised our average operating profit margin estimate for 2026 to 2030 by 0.4 percentage points, from 4.1% to 4.5%." He added, "The 12-month forward price-to-book ratio (PBR) for the target price is 6.80 times, and the upside potential compared to the previous day's closing price is 32%."

In the second quarter of this year, L&F posted sales of 520.1 billion won, down 6% year-on-year, and an operating loss of 121.2 billion won, falling short of the consensus (the average forecast by securities companies). Lee pointed out, "The main reasons were inventory valuation losses and reverse lagging losses caused by the decline in the won-dollar exchange rate and lithium prices." He added, "However, the fact that cathode material sales volume increased by 55% quarter-on-quarter as deliveries of the Tesla Model Y Juniper began in earnest is a positive sign."

It is expected that the company will return to profitability in the third quarter for the first time in two years. Lee stated, "L&F's third-quarter results are projected to show sales of 694.5 billion won, up 98% year-on-year, and an operating profit of 19.4 billion won, turning profitable again after two years." He continued, "As shipments to Tesla continue to expand, third-quarter shipment volume is estimated to increase by 45% compared to the second quarter, which should enable improved profitability through better coverage of fixed costs." He also noted, "There is additional potential for profitability improvement from the reversal of inventory valuation losses, as the won-dollar exchange rate and lithium prices as of July 30 have risen by 2.4% and 18%, respectively, compared to the end of the second quarter."

The company is also expected to benefit from its proactive response to LFP (lithium iron phosphate) batteries. Lee commented, "While the expansion of shipments for the Model Y Juniper is clearly driving short-term performance improvement, L&F is responding to LFP mass production more actively and rapidly than other non-Chinese companies, so related benefits are anticipated." He added, "The company has already secured at least two clients, and further cooperation with key customers such as LG Energy Solution and Tesla is also expected in the future."