[Click eStock] "L&F, 2Q Earnings Exceed Consensus... Continued Price Increase"

[Asia Economy Reporter Lee Jung-yoon] Shin Young Securities maintained a buy rating and a target price of 380,000 KRW for L&F on the 20th, expecting the company's Q2 earnings this year to exceed consensus estimates and the absolute scale of quarterly profit growth to increase.

L&F's Q2 sales this year are projected to increase by 67% from the previous quarter to 923 billion KRW, operating profit to rise by 29% to 73 billion KRW, and OPM (Operating Profit Margin) to reach 7.9%, surpassing the prior consensus sales of 861 billion KRW and operating profit of 70 billion KRW.

For Q2, both the price and volume of cathode materials are estimated to have increased compared to the previous quarter. Jinsoo Park, a researcher at Shin Young Securities, explained, "Due to the rise in average metal prices last quarter, the price of cathode materials in Q2 is estimated to have increased by 30% quarter-on-quarter, while shipments also rose by more than 20%. According to monthly export-import statistics, the domestic average export price of cathode materials in Q2 was $44 per kilogram, a 41% increase from the previous quarter."

He added, "Considering that the prices of major metals used in cathode materials have stabilized since May, the price increase of cathode materials is expected to continue through Q3. Regardless of Tesla's Shanghai plant shutdown issue, which is the final customer of NCMA (Nickel Cobalt Manganese Aluminum) cathode materials, L&F's shipments of cathode materials continued in Q2, indicating steady demand for high-nickel NCMA."

L&F's sales for this year are forecasted at 3.9 trillion KRW, operating profit at 318 billion KRW, and operating profit margin at 8.0%. Profitability is expected to decline from 9.6% in Q1 to lower levels in Q2 through Q4, due to the structural nature where profit margins fall if prices rise while processing margins per weight of cathode materials remain constant.

However, the absolute scale of quarterly profit growth is expected to increase, with operating profit growth rates quarter-on-quarter for Q2 to Q4 projected at 37%, 10%, and 27%, respectively. Researcher Park stated, "The first phase of the second plant expansion is expected to generate sales starting in Q3, and the second phase expansion in Q1 2023, which will likely bring fixed cost burdens due to initial operation of the new lines. The easing of valuation pressure is also positive."

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