Battery stocks remain undervalued: Influencers

Writer Park Soon-hyeok [Photo by Kim Ho-young, Han Joo-hyung]

Investors were advised to keep an eye on battery material stocks, particularly electrolyte-related ones, by Sun Dae-in, economist and head of SDInomics, at the Seoul Money Show Plus 2023 on Thursday.

“Once the U.S. Inflation Reduction Act is fully implemented in 2024, Korean companies will benefit, as manufacturers targeting U.S. markets will want to replace their heavy reliance on China for electrolyte with Korean suppliers,” Sun said during a lecture session organized as part of the three-day personal finance management exhibit.

Park Soon-hyeok, a writer well known as a battery stock enthusiast, also highlighted battery material stocks, viewing them as still having high potential, despite the controversy over the overvaluation of secondary stocks.

“I believe the majority of secondary battery stocks are still rather undervalued because, when looking at their price-to-earnings (PER) ratios, most of them are observed to be below 10 times by around 2025 or 2026,” he said. But Park added that he does not believe PER is a good gauge to evaluate the corporate value of EcoSport Co., which has been in the middle of the secondary battery stocks frenzy this year, as EcoPro is a holdings company.

Sun also agreed that secondary battery stocks are still somewhat undervalued. “As the three major battery makers are increasing their production capacity targeting North American markets, some electrolyte companies are bracing for it, especially considering the possibilities that the battery makers replace the volumes formerly provided by suppliers in China or elsewhere with Korean providers,” he said, projecting “trillions of won in sales in two to three years” at those companies.

However, both Park and Sun were skeptical about lithium-phosphate-iron (LFP) batteries. “Nickel-cobalt-manganese (NCM) is recyclable, while LFP requires disposal, causing costs for disposal. This makes NCM ultimately more cost-competitive compared to LFP, even if LFP’s production cost seems cheaper,” Park said. Sun pointed out that the use of LFP has been falling over the past few years in the North American markets, adding that he believes LFP will lose its place after the full-scale production of mid-nickel batteries.

Both Sun and Park were relatively positive about the battery industry becoming the next-generation growth engine after semiconductors. “For the semiconductor industry, it started with and was mostly led by large corporations. Meanwhile, the battery industry is growing on all ends of the supply chain, which includes not only the three battery cell companies but also the material, component, and equipment companies, which is very promising,” Sun said. Park also shared observers’ projections that the battery market will be five to 10 times the size of memory semiconductors by 2035.

Sun and Park are some of the most “influential” figures among individual investors, with a substantial audience gathering to listen to their insights.