The No. 1 Market Cap Company among Korean Battery Makers
Samsung SDI has surpassed LG Chem in terms of market capitalization. Samsung SDI rose nearly 4 percent on Aug. 31, becoming the No. 1 market cap company among Korean battery-related companies.
The reversal in market cap rankings between Samsung SDI and LG Chem is attributed to General Motors’ recent recall of Bolt EVs, which were loaded with LG Chem's batteries. The recall poured cold water on LG Chem stocks. Other negative factors included a fire in Volkswagen electric vehicle and an application for postponement of LG Energy Solution’s IPO.
On Aug. 31, Samsung SDI and LG Chem recorded 54,530.3 billion won and 53,509.0 trillion won in their market cap, respectively. Samsung SDI closed at 793,000 won, up 3.93 percent from the previous day, while LG Chem fell 1.56 percent to 758,000 won. LG Chem's market capitalization shrank by 9,882.9 billion won between Aug. 23 and Aug. 31.
Samsung Securities said that GM will spend a total of US$1.8 billion (2.11 trillion won) on the recall. A Samsung Securities analyst expected that LG Group will have to pay between 1.5 trillion won and 1.37 trillion won (50 percent to 65 percent), with LG Energy Solution, a subsidiary of LG Chem, expected to shoulder between 423.0 billion won to 555.0 billion won. Except for the 91 billion won reflected in its second-quarter performance, LG Chem will have to set aside an additional 332 billion won to 464 billion won in provisions beginning from the third quarter.
Not only the GM Bolt EVs but Volkswagen's electric car ID3 recently caught fire. Volkswagen is still investigating the cause of the fire, but LG Chem may be hit hard once again if the fire is blamed on the battery manufacturer.
Securities firms are lowering LG Chem's target stock price in unison after the news broke out. Samsung Securities lowered the target price from 1.1 million won to 1.05 million won, while Hi Investment Securities from 1.15 million won to 1 million won.
A delay in the listing of LG Energy Solution also weighed on LG Chem’s share price. LG Energy Solution said it will have an IPO after resolving uncertainties related to corporate valuation.
Unlike LG Chem facing weakened investor sentiments due to a series of unfavorable factors, Samsung SDI is expected to produce solid results in the second half following the second quarter.
Samsung SDI posted an earnings surprise in the second quarter and its performance prospects for the second half are bright. Samsung SDI’s second-quarter sales ascended 30.3 percent from 2020 to 3,334.3 billion won, while its operating profit rose 184.4 percent to 295.2 billion won. Its operating profit consensus stood at 262 billion won.