[Click eStock] "LS, Precursor Business Entry Drives Corporate Value Reassessment"…Investment Rating Up

On the 19th, Kiwoom Securities upgraded LS's investment opinion from outperform to buy and raised the target price from 110,000 KRW to 120,000 KRW, stating that LS will enter the precursor business, a core battery material, through a joint venture with L&F.

LS has decided to enter the precursor business, a core battery material, by establishing a joint venture with L&F. LS MnM will supply nickel sulfate to the precursor joint venture, and L&F will receive the precursor to produce cathode materials, thereby building a value chain. LS is highly likely to expand into the spent battery recycling business following nickel sulfate and precursor materials, strengthening its position as a battery material company. This growth strategy aligns with LS Group's core competencies in smelting and materials, as well as energy technology, and is regarded as a clear factor for corporate value re-evaluation.

Kim Jisan, a researcher at Kiwoom Securities, explained, "It is notable that the holding company LS is directly investing, acquiring a 55% stake in the joint venture for 167.8 billion KRW. The joint venture plans to increase precursor production capacity stepwise to 20,000 tons, 40,000 tons, and 120,000 tons, aiming for mass production in 2025-2026. Based on the secondary 40,000-ton production capacity, sales are estimated to reach 800 billion KRW."

LS's second-quarter performance this year is expected to exceed previous estimates. Operating profit is projected to increase by 28% year-on-year to 250.6 billion KRW. The MnM division, which underperformed in the first quarter due to regular maintenance, is expected to recover normal copper profitability. Key businesses such as power cables in the cable division, tractors in the Mtron division, and North American communication cables in the I&D division are performing well despite uncertain economic conditions. The ELECTRIC division is also expected to continue its record-high performance in the second quarter, driven by a boom in power infrastructure business centered on distribution systems.

Researcher Kim said, "In addition to the battery material business, attention should be paid to the momentum in submarine cables. Last month, LS signed a submarine cable supply contract worth 189 billion KRW for the Changhua offshore wind farm in Taiwan, securing exclusive contracts for eight rounds in the first phase of Taiwan's offshore wind farm project, with total orders reaching 1 trillion KRW."

He added, "Domestically, LS partnered with Hanwha Construction and was selected as the preferred bidder for supplying submarine cables for the Sinan Ui offshore wind power project, with the contract size expected to be in the 100 billion KRW range. With the new fourth plant starting full-scale operation from the second quarter, the potential production capacity of submarine cables has increased by 50%, which will expand its contribution to earnings."

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