[Market Focus] 'Short-Term Surge Burden' L&F Drops 14%

The share price of L&F is experiencing a decline of over 14%. This is due to concerns that the recent sharp rise in the stock price has increased the valuation burden.

As of 2:10 p.m. on October 30, L&F was trading at 126,300 won, down 20,700 won (-14.08%) from the previous trading day.

The previous day, L&F announced that its consolidated operating profit for the third quarter of this year was provisionally tallied at 22.1 billion won. This marks a turnaround from the same period last year, when the company posted an operating loss of 72.4 billion won. It is the first profit in eight quarters since the fourth quarter of 2023.

However, the recent surge in the stock price has heightened concerns over valuation. On this day, iM Securities raised its target price for L&F to 130,000 won, but downgraded its investment rating from Buy to Hold, citing the burden from the short-term stock price surge.

Jung Wonseok, a researcher at iM Securities, said, "Expectations of a surge in demand for LFP (lithium iron phosphate) batteries from domestic companies, driven by the U.S. government's strengthened regulations on Chinese-made energy storage systems (ESS), have led L&F's stock price to soar by about 140% compared to early last month." He added, "As a result of this rally, the current valuation stands at a price-to-earnings ratio (PER) of 58.8 times and a price-to-book ratio (PBR) of 13.1 times based on projected 2028 earnings, which is significantly higher than the global average for the cathode materials sector."

He continued, "While future earnings prospects are positive, the potential for further stock price increases is limited," adding, "If the short-term rally driven by supply and demand factors comes to an end, we cannot rule out the possibility of a price correction. Therefore, a conservative approach is advisable for the time being."