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The global electric vehicle frenzy that has tripled the shares of Tesla Inc. is now capitalizing on the actions of a South Korean provider that has become the world’s largest maker of electric vehicle batteries.
South Korea’s LG Chem Ltd. is up more than 62% this year to a valuation of around $ 30 billion, making it the sixth-largest share in the Kospi benchmark and leaving Hyundai Motor Co., the The country’s largest automaker, in the dust.
While LG supplies many automakers, including Hyundai, it has been especially buoyed by a deal to supply batteries to the Tesla factory in China, which is pumping Elon Musk’s cars at an ever-increasing rate.
The expansion of electric vehicle subsidies in Europe and Tesla’s staggering rebound have fueled related actions across the globe despite global economic concerns. Fundamentals matter little, with Tesla just starting to show gains and truck maker EV Nikola Corp. has yet to produce its first semi.
“We believe that LG Chem will benefit the most in Europe with its high market share and positioning,” said Jae Lee, CEO of Timefolio Asset Management SG Pvt, a Singapore-based hedge fund that owns the company’s shares.
LG Chem had 24% of the global EV battery market at the end of May. China’s Contemporary Amperex Technology Co. Ltd. has been hit by the pandemic, the trade war, and the reduction of government subsidies in its local market, although it recently forged its own supply contract for Tesla’s Shanghai facility.
LG Chem had a $ 124 billion battery order backlog in early 2020, and aims to expand capacity to 100 gigawatt hours by the end of 2020 and 120 GWh in 2021.
“LG Chem has the largest EV battery capacity in the world right now and is even increasing it, while its rivals are not,” said Wooho Rho, an analyst at Meritz Securities Co. Rho and at least six other analysts have increased their targets. of prices. for LG Chem this month, with Meritz expecting a consolidated operating profit of 532 billion won ($ 440 million) for the quarter ending in June, the most in about two years.
The company’s shares fell as much as 1.9% on Monday in Seoul, extending its 2.5% drop last week. Some investors are concerned that increased competition between battery manufacturers may put pressure on margin growth, according to Hyunsoo Kim, an analyst at Hana Financial Investment Co.
Other market concerns include the possibility that Tesla may announce a new battery supplier at its “Battery Day” event on September 22, Meritz’s Rho said, adding that such concerns are likely to be exaggerated due to high barriers to any possible new partner.
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