JV May Supply EV Parts to Apple
The author is an analyst of KB Securities. He can be reached at newday@kbfg.com. -- Ed.
Shares of key LG affiliates rally
— Shares of key LG affiliates rallied sharply on news that LG Electronics (LGE) plans to spin off its EV component business and form a new joint venture.
— While LGE soared by the daily limit (+29.6%), LG Innotek also gained 12.8%, LG Corp. 10.3%, and LG Display 6.4%.
— LG Corp. rallied by as much as 24.8% during intraday trading, but capitulated some gains after 2:00pm as investors locked in profits.
— Due to the sharp rally by LGE, LG Corp’s stake in its affiliate increased by KRW1.5tn and expanded LG Corp.’s market cap by KRW1.4tn.
To establish an EV component JV with Magna International
— LGE announced it would establish a new joint venture (tentatively LG Magna e-Powertrain) that specializes in EV powertrains with Magna International, one of the leading automotive parts companies based in Canada.
— LGE plans to first spin off several of its green divisions (i.e., motors/power electronics, battery heaters) from the vehicle solution unit, then sell a 49% stake in the new company to Magna International for KRW501.6bn.
— After securing approval at the March general shareholders’ meeting, LGE expects to launch the spin-off and joint venture on Jul 1, 2021.
Focus on possibility of JV supplying EV parts to Apple
— We believe major LG affiliates rallied sharply on Dec. 23 largely due to hopes that the new JV would supply parts for Apple’s potential EV business.
— With Apple rumored to roll out an EV with an autonomous driving system in 2024, Magna International is believed to have discussed supplying parts with Apple.
— If investor expectations are realized, the growth of the new JV subsidiary should bolster the value of LGE, catalyzing LG Corp. shares upward.