Kwon Young-soo, CEO of LG Energy Solution, "Market Cap and Share Gap with CATL Will Narrow" (Comprehensive)

Successful IPO Secures Up to 12 Trillion Won Investment
Expanding Global Production Capacity and Next-Generation R&D New Businesses
Strategy for Battery No.1 Position with Production Capacity, Overseas Clients, and Technology

[Asia Economy Reporters Hwang Yoon-joo and Lee Min-woo] LG Energy Solution is positioning itself as the number one brand in the electric vehicle battery market through its initial public offering (IPO). With the investment funds from the IPO, the company plans to expand domestic and overseas production plants and develop next-generation batteries, aiming to narrow the market capitalization and market share gap with China's CATL.

On the 10th, LG Energy Solution held an online press conference at its Park One headquarters in Yeouido, Seoul, unveiling its mid- to long-term business vision and strategy. The company will finalize the public offering price based on demand forecasting results on the 14th of this month, conduct public subscription for general investors from the 18th to 19th, and complete its new listing on the Korea Composite Stock Price Index (KOSPI) by the end of the month.

◆ Stock Price Expected to Rise After IPO... Narrowing Market Share and Market Cap Gap with CATL = Kwon Young-soo, CEO of LG Energy Solution, expressed confidence in the stock price increase following the listing. As of November last year, LG Energy Solution ranked second globally with a 20.5% share of electric vehicle secondary battery usage, behind China's CATL at 31.8%. However, the market capitalization gap is significant. Based on the upper limit of the public offering price, LG Energy Solution's market cap is estimated at about 70.2 trillion KRW, making it the second largest in the domestic stock market. In contrast, China's CATL has a market cap of 1.2515 trillion yuan (approximately 235.3 trillion KRW), about 3.4 times that of LG Energy Solution.

Vice Chairman Kwon stated, "Considering various factors, the large gap in market capitalization between CATL and our company is bound to narrow," adding, "With current order amounts at 260 trillion KRW and capacity expansion in mind, at least 25% growth is achievable."

He continued, "CATL has easily increased sales by following the trend of Chinese automakers using domestic batteries instead of external ones, but to become a global company, it must secure customers in Europe and the U.S., which will not be easy," emphasizing, "LG Energy Solution holds advantages in various materials such as cathode materials, has secured global customers that CATL does not have, and has production bases in Europe, the U.S., and China, as well as numerous patents (IP)."

He also highlighted that the stock price of LG Chem, which plummeted after the spin-off of LG Energy Solution and the disappearance of the 'blue-chip' premium in secondary batteries, could recover in the future. Since LG Chem will still hold more than 80% of LG Energy Solution's shares after the IPO, it is expected to regain its true value.

CEO Kwon explained, "Even after LG Energy Solution's listing and receiving investments from institutions and individuals, LG Chem will still hold 82% of LG Energy Solution's shares," adding, "Based on the upper limit of the public offering price alone, this corresponds to a value of 60 trillion KRW, so LG Chem's current market capitalization in the 50 trillion KRW range is excessively undervalued and will soon find its rightful place."

[Image source=Yonhap News]

◆ LG Energy Solution to Secure 12 Trillion KRW in Funds if IPO Succeeds... Possibility of Additional European Joint Ventures = LG Energy Solution plans to use the funds raised through the IPO primarily as operating capital to expand production capacity at domestic production bases such as the Ochang plant, as well as overseas production bases in North America, Europe, and China. This will enable the company to respond to demand from major customers located in overseas markets and establish supply chains for mass production locally, thereby strengthening cost competitiveness and customer responsiveness for efficient competition in the global secondary battery market.

In fact, LG Energy Solution plans to invest 5.6 trillion KRW by 2024 to expand production capacity at the North American Holland plant and the GM joint venture Ultium Cells. The company will invest 645 billion KRW in the Korean Ochang plant by next year to build a cylindrical battery production line for EVs, where demand has recently increased. It will also invest 1.4 trillion KRW and 1.2 trillion KRW respectively in European and Chinese production plants by 2024.

On the same day, CEO Kwon revealed that discussions are underway regarding the establishment of additional production plants in Europe, considering various forms such as joint ventures (JV) or wholly owned plants. He mentioned that in response to automakers' moves toward battery internalization, LG Energy Solution has proposed 'battery joint ventures' and said, "The joint ventures with GM, Hyundai, and Stellantis have been successful, and we are planning to establish joint ventures with other companies soon."

Regarding proposals to attract European plants, he said, "If established in Poland, it would be a 100% wholly owned plant, but if established in other regions, it is likely to be a joint venture."

He particularly forecasted that the Chinese market expansion will accelerate this year. He stated that the company plans to start business with one Chinese company from this year. CEO Kwon emphasized, "China will become the world's number one electric vehicle market, so it is an indispensable market," adding, "Since we have had good relationships in the past, we will steadily pursue entry and there will definitely be opportunities." He also explained that plans to jointly secure raw materials with POSCO are underway.

Meanwhile, the lead underwriters for LG Energy Solution's listing are KB Securities and Morgan Stanley International Securities, with joint underwriters including Daishin Securities, Shinhan Investment Corp., Goldman Sachs Securities, Merrill Lynch International LLC Securities, and Citigroup Global Markets Securities. Mirae Asset Securities, Shin Young Securities, Hana Financial Investment, and Hi Investment & Securities are participating as underwriting companies.

This content was produced with the assistance of AI translation services.