[Click eStock] "L&F, Mid-to-Long-Term Earnings Estimates Lowered... Target Price Down"

Hi Investment & Securities lowered the target price for L&F from 250,000 KRW to 200,000 KRW on the 5th, citing a downward revision of mid- to long-term capacity and earnings estimates. The investment rating was maintained at 'Buy.'

L&F recorded a 46% year-on-year decline in Q4 sales, amounting to 657.6 billion KRW. Operating loss was 280.4 billion KRW, turning from operating profit to loss compared to the previous year. Both sales of 966.4 billion KRW and operating profit of 6.9 billion KRW, which were market expectations, were missed.

Researcher Jeong Won-seok said, "Under the global interest rate hike trend, Tesla experienced sluggish sales due to a slowdown in electric vehicle demand." He added, "As a result, the shipment volume of cylindrical batteries from the front-end customer LG Energy Solution significantly decreased, causing Q4 cathode material shipments to drop about 43% compared to the previous quarter, and there was also a decline in cathode material prices due to the plunge in lithium prices."

Researcher Jeong noted, "A large-scale inventory asset valuation loss also occurred." He pointed out, "The inventory asset valuation losses reflected in 2023 and Q4 were 250.3 billion KRW and 238 billion KRW, respectively. Although Q4 inventory assets decreased to about 1.2 trillion KRW compared to the previous quarter, the inventory turnover rate dropped significantly to about 57% from the usual 108%."

He further stated, "This year, the company's cathode material shipment volume is expected to decrease by about 1% compared to the previous year." He also forecasted, "Due to last year's plunge in lithium prices, the average annual cathode material price this year is expected to be about 20-30% lower than the previous year."

He continued, "In Q1 this year, lithium prices also showed a downward trend, so there is a possibility of additional inventory asset valuation losses in the first half of the year." He estimated, "Reflecting this, 2024 sales are expected to decrease by 25% year-on-year to 3.5 trillion KRW, with an operating loss of 202 billion KRW."

He added, "However, the company is preparing various new cathode material products such as mid-90% high-nickel NCMA, 90% high-nickel single crystal, and LFP to establish a new growth foundation." He recommended, "Through a joint venture with LS Group, the company is preparing for precursor internalization in 2025, and is also considering establishing a joint venture with Mitsubishi Chemical Group to enter the anode material market. Therefore, the current stock price decline should be viewed as a buying opportunity from a mid- to long-term perspective."

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