Samsung SDI outperforms LG Chem in market capitalization
Samsung SDI has overtaken LG Chem in terms of market capitalization. Samsung SDI rose nearly 4 percent on August 31, becoming the No. 1 market capitalization company among Korean battery companies.
The market capitalization reversal between Samsung SDI and LG Chem is attributed to General Motors’ recent recall of Bolt electric vehicles loaded with LG Chem batteries. The recall poured cold water on LG Chem shares. Other negative factors included a fire in a Volkswagen electric vehicle and a motion to postpone LG Energy Solution’s IPO.
On August 31, Samsung SDI and LG Chem were respectively 54,530.3 billion won and 53,509.0 trillion won in their market capitalization. Samsung SDI closed at 793,000 won, up 3.93 percent from the previous day, while LG Chem fell 1.56 percent to 758,000 won. LG Chem’s market cap decreased by 9,882.9 billion won between August 23 and August 31.
Samsung Securities said GM will spend a total of $ 1.8 billion (2.11 trillion won) on the recall. An analyst with Samsung Securities expects LG Group to pay between won 1.5 trillion and won 1.37 trillion (50 to 65 percent), while LG Energy Solution, a subsidiary of LG Chem, is expected to pay between won 423.0 billion to shoulder 555.0 billion won. Aside from the 91 billion won, which is reflected in the performance of the second quarter, LG Chem will have to add another 332 billion won to 464 billion won in provisions beginning in the third quarter.
Not only the electric cars from GM Bolt, but also the ID3 electric car from Volkswagen recently caught fire. Volkswagen is still investigating the cause of the fire, but LG Chem could be hit hard again if the battery manufacturer is blamed for the fire.
Investment firms jointly cut LG Chem’s price target after the news broke. Samsung Securities cut its target price from 1.1 million won to 1.05 million won, while Hi Investment Securities cut its price target from 1.15 million won to 1 million won.
A delay in the listing of LG Energy Solution also weighed on LG Chem’s share price. LG Energy Solution announced that it would go public after resolving uncertainties surrounding its valuation.
Unlike LG Chem, which is facing weakened investor sentiment due to a number of adverse factors, Samsung SDI is expected to deliver solid results in the second half after the second quarter.
Samsung SDI had a surprise in earnings in the second quarter and its second half performance outlook is good. Samsung SDI revenue rose 30.3 percent to 3,334.3 billion won in the second quarter of 2020, while operating profit rose 184.4 percent to 295.2 billion won. The consensus operating profit was 262 billion won.