Have Secondary Battery Stocks Hit Bottom... Now Surging Ahead

LG Energy Solution up 25% this month
Electric vehicle sales hit record high last month
"ESS demand in the US expected to grow"

Domestic secondary battery stocks have been surging since October. This is attributed to the steady increase in global electric vehicle sales, as well as growing expectations for increased demand for energy storage systems (ESS) driven by investments in artificial intelligence (AI).

According to the Korea Exchange on October 20, LG Energy Solution closed at 434,000 won on the 17th. This represents a 24.89% increase compared to the previous month. Samsung SDI (24.63%), Ecopro BM (42.48%), and Ecopro (54.48%) also saw significant gains.

As major secondary battery-related stocks have risen, exchange-traded funds (ETFs) have also delivered strong returns. KODEX Secondary Battery Industry Leverage rose by 48.65%, while TIGER Secondary Battery TOP10 Leverage climbed by 38.27%.

The rise in secondary battery-related stocks is primarily due to expanding global demand. First, electric vehicle sales continue to increase. According to the UK market research firm Rho Motion, global electric vehicle sales last month reached approximately 2.1 million units, the highest monthly figure on record.

Improved earnings have also served as a positive factor. For the third quarter of this year, LG Energy Solution reported consolidated provisional sales of 5.6999 trillion won and an operating profit of 601.3 billion won. Compared to the same period last year, sales decreased by 17.1%, while operating profit increased by 34.1%.

Kang Dongjin, a researcher at Hyundai Motor Securities, stated, "The operating profit exceeding consensus is believed to be due to strong performance in ESS and cylindrical batteries. Even though automotive battery sales were likely sluggish, the quarter-on-quarter increase in sales also appears to be driven by robust ESS and cylindrical battery sales."

Expectations for ESS are also rising. In the United States, AI investments are increasing demand for data centers, which in turn is driving a surge in electricity demand and highlighting the need for ESS. According to Shinyoung Securities, demand for ESS battery installations in the US is estimated at around 120 GWh, with an expected average annual growth rate of 25% after 2024.

Park Jinsu, a researcher at Shinyoung Securities, explained, "Due to AI and reshoring, electricity demand in the United States is soaring. Currently, the most affordable and fastest way to meet this demand is to combine solar power with ESS."