The LG battery segment wants to take over the world after the blockbuster IPO

The LG battery business made a huge donation to South Korea last week, aided by surprising interest from millions of ordinary Koreans who believe US-China conflicts will drive car manufacturers around the world to its own expertise.

“It’s a big deal for the stock market. I do not want to miss out on opportunities like this, “said Bae Sung-hoon, an office worker who registered for the IPO of LG Energy Solution.

A share price of $ 10.8bn makes the company worth about $ 70bn, behind Samsung and SK Hynix alone in South Korea. 4.4m retailers invested Won114tn ($ 96bn) in advertising, with their share of a quarter of the shares sold.

But the series is just the beginning of a real war in which LGES seeks to challenge China’s $ 200bn battery giant. Contemporary Amperex Technology – aspiring bankers and industry experts say the Korean team can achieve.

“LGES is already leading these companies in terms of technology, although it lags behind CATL,” said a banking bank close to the deal. “The success of the IPO shows that investors are optimistic about the growth of LGES because the investment contributes to its growth plans.”

James Lim, a researcher at California-based hedge fund Dalton Investments, is one who sees the company benefiting from the “growing technical war” between the US and China, which it believes will provide opportunities for non-Chinese batteries between America and China. . European customers.

“This will enable LGES to expand the global market while CATL may struggle to grow abroad,” he said.

However, challenges remain for the South Korean battery operator to close the border, with some investors questioning whether the company can do the right thing to overcome market competition and profits.

Sales of electric vehicles predict Deloitte increase by 12 times this decade to 31.1 a year, accounting for about one-third of all new cars by 2030. LGES controls about 20 percent of the global EV battery market as opposed to 32 percent CATL. , according to SNE Research statistics.

LGES is among the worst offenders in the for-profit industry, sending losses in 2019 and 2020. Last year it also reported a 5.9 per cent limit, at least half of CATL of about 12.5 per cent, according to SK Securities.

“CATL is a very lucrative company because of its value,” said Lee Chai-won, chairman of Life Asset Management, on the low cost of labor in China, easy access to raw materials and generous government support for local battery makers. . “While LGES has good financial support, it will not be easy to maximize profits in the midst of increasing competition.”

The LGES ‘assets are supported by the largest LG Group, one of the largest corporations in South Korea, which manufactures batteries through its company Chem Chem. LGES, which has marine plants in Poland, the US and China, plans to invest about Won8.85tn in these plants by 2025, with a target of almost three times that.

“The IPO is a very important factor in improving growth and offers the opportunity to compete more effectively than others,” says Neil Beveridge, a Bernstein researcher.

LGES, which has partnerships with General Motors, Stellantis and Hyundai Motor, is now looking at growth in the US. SK Securities predicts that by the year 2025, nearly half of all electric vehicles manufactured in the US will use the company’s batteries.

With China’s rules for companies favoring domestic companies, Beijing’s corporate policy also forces South Korean companies to separate from the world’s largest EV market.

“CATL is very focused on China and strives to go global while LGES is doing well in international markets outside of China,” said Choi Joon-chul, chief of VIP Research and Management.

And with China producing 70 percent of lithium-ion batteries worldwide, Beijing will cut funding for Chinese manufacturers next year and experts expect the CATL border to reach a critical juncture.

“Over time, because of disagreements, we see[between China and the west]. . . it creates opportunities for companies outside of China, especially the LGES, which is the biggest competitor to CATL, “said Beveridge.

Kwon Young-soo, chief executive of LGES, has predicted that the global market will pass CATL. But major flaws in some of his company’s batteries, which forced GM and Hyundai to do more the most expensive companies remember, squandered some money. And other key customers including Tesla and VW are planning to put their batteries inside.

“Addressing security concerns is as important to their peers as GM,” Lim said. “The company will be pushed by competitors if they can’t.”

Rising entry prices are further accelerating the LGES process to reduce reliance on global resources that are not available in China, where the sale of rocket EV has led to a shortage of essential metals for battery production.

LG Chem is expected to invest $ 5.2bn in the production of EV battery products and equipment by 2025. But Yoon Hyuk-jin, an expert at SK Securities, said the group “needs to invest more in off-road projects to improve its stability”.

More recently, investors are paying close attention to how the battery-generating units operate when sales begin Thursday.

“The cost of the shares could be doubled by the value of the IPO, depending on the attraction of EV batteries.

But after companies upgraded Won17tn’s reputation at the Kospi market in Seoul last year, some feared that poor visibility from LGES could ruin the interest of the upcoming major list, including Hyundai Engineering, Kakao Entertainment and Market Kurly’s food delivery platform.

Some South Korean groups could be at odds over the success of the LGES, VIP Choi warned, saying regulators focus too much on the complaints they have against companies that are removing businesses from a list that cuts down on existing ones.

“It would not be easy for Korean companies to follow the procedures for splitting and compiling these lists.”