[Click e-Stock] "L&F, Leveraging Return to Profitability to Lead ESS Market"

On October 30, DS Investment & Securities raised its target price for L&F to 180,000 won, reflecting an upward revision of its 2027 estimates, and maintained its "Buy" investment rating.

L&F posted sales of 652.4 billion won and an operating profit of 22.1 billion won in the third quarter. Sales increased by 16% year-on-year, and the company returned to profitability, exceeding market expectations.

Choi Taeyong, a researcher at DS Investment & Securities, stated, "The key factor was the reversal of 23.4 billion won in inventory valuation allowances, driven by the rise in major raw material prices." He added, "Excluding the reversal of allowances and one-off expenses, the adjusted operating profit stands at approximately 5.4 billion won, marking a fundamental return to profitability."

Researcher Choi forecasts that L&F's fourth-quarter sales will reach 675.2 billion won, up 84.8% year-on-year, with an operating profit of 6.2 billion won, signaling a return to profitability. He expects the expansion in Ni95 adoption to continue, leading to a 4% quarter-on-quarter increase in high-nickel shipments, while mid-nickel shipments are projected to decrease by 15% quarter-on-quarter due to a reduction in NCM ESS volumes.

Choi explained, "Given that the sales scale is similar to the previous quarter, fourth-quarter operating profit is expected to show slight growth compared to the previous quarter's adjusted operating profit of 5.4 billion won, thereby maintaining the profitability trend."

L&F has moved up the mass production schedule for LFP cathode materials from the original plan of 2027 to the third quarter of 2026. The initial production capacity (CAPA) is set at 30,000 tons, all of which will be supplied for energy storage systems (ESS). The company plans to add another 30,000 tons of capacity, aiming to supply the electric vehicle (EV) market by 2027.

Researcher Choi noted, "L&F's LFP cathode mass production schedule is the fastest among domestic competitors." He continued, "If the 30,000-ton ESS capacity operates at full scale, expected annual sales would be about 540 billion won, which is approximately 24% of this year's sales. LFP sales can start being recognized from the second half of 2026."

He added, "There is also mention of the possibility of additional early operation, suggesting further upside potential." He concluded, "With the upward revision of the 2027 estimates, we are raising the target price to 180,000 won and maintaining our 'Buy' recommendation."