How much is LG Ensol worth?

 

 

 

There are several areas in the world where Korea has the highest level of technology and market share.

The memory semiconductors represented by Samsung Electronics and SK Hynix, the shipbuilding industry represented by Geoje and Ulsan, and the battery industry, which is expanding the pie, are representative examples.

Memory semiconductors are expanding their field to system semiconductor foundries, and the shipbuilding industry is going through a tunnel of deep recession and expecting a supercycle in response to environmental regulations little by little.

So, how is the battery industry changing?

Why the battery industry is in the spotlight

First, in order to understand the current battery industry, the concept of 'secondary battery' is necessary.

Although secondary battery is a word that has been in the spotlight recently, in fact, we have been exposed to secondary batteries for a long time.

In general, if a battery that is used and discarded once is a primary battery, it is a secondary cell battery (a.k.a. Rechargeable battery) that is recharged and reused through current supplied from an external power source.

These secondary batteries are lead-acid batteries and have been used since automobiles in the 1900s.

In the 1990s, it was widely used in CD players, Walkmans, and power tools, and recently in electronic devices such as laptops, mobile phones, and tablets.

It has a long history, but what is the reason why the term 'secondary battery' has been in the spotlight recently?

The answer lies in the expansion of the electric vehicle market.

Tesla achieved record performance with 930,000 units last year, from only 100,000 units in 2017 based on vehicle deliveries.

Of course, this record is expected to be broken right away this year, and Tesla's expected vehicle deliveries this year range from as little as 1.5 million units to as little as 1.5 million units in the market.

It is expected that as many as 200,000 units.

Then, let's check how much the share of electric vehicles in the overall lithium-ion battery market is increasing.

The following table is the September 2021 data of BNEF (Bloomberg New Energy Finance), and the proportion of electric vehicles (EVs), which is increasing exponentially, is well shown in red.

It can also be seen that the consumer electronics sector, which includes smartphones and laptops, is gradually decreasing its share of the battery market.

If so, some of you might want to know the principle of how lithium-ion batteries charge and discharge.

As shown in the figure below, lithium ions (Li+) are charged and discharged by going back and forth between the positive and negative electrodes.

LG Ensol's position in the battery market It seems that the concept of secondary batteries has been understood. If so, let's see how the market share is changing.

According to the Korea Battery Industry Association, in the global lithium-ion battery market, it is understood that three countries, Korea, China, and Japan occupy more than 90% of the global market.

Although Korea, China, and Japan account for 90% of the market share, if you look closely at each year, you will notice a big change.

Japan's Panasonic, which took the No. 1 position until 2019, passed the No. 1 position to China's CATL and Korea's LG Energy Solution in 2020, and CATL is unrivaledly leading in 2021.

SK On in Korea, which has increased its battery usage more than five times in three years, is also showing a significant change in its market share.

In terms of market share alone, the future of LG Energy Solutions may seem precarious compared to CATL, but in terms of battery usage, it is showing very high growth potential from 2019 to 12.4GWh, 33.5GWh, and 55.0GWh (12 months estimate).

 

 

 

Since China will ultimately become the largest market, CATL's No. 1 position seems obvious, but Korean companies who will expand their market centering on the European and American markets are also expected to make a leap forward.

The size of the EV battery market in 2030 predicted by the BNEF data earlier was about 2500GWh, and even if it takes only about 20% of the market share, the battery usage can be expected to increase by 500GWh, which is 10 times higher than the current LG Energy Solution usage.

The reason for such a positive market expansion is the regulation of internal combustion locomotives and policies to encourage electric vehicles in accordance with the global eco-friendly stance.

The UK and Germany plan to ban the sale of internal combustion locomotives by 2030 and France and Spain by 2040.

Seoul in Korea and California in the United States also have plans to ban sales of internal combustion engine vehicles or stop registration of new vehicles from 2035, which seems to be an irresistible macro trend.

How much is LG Ensol worth?

The funds raised through this public offering will be mainly used for facility investment, R&D, and investment in local subsidiaries to expand production capacity in North America/Europe/China.

Due to the inflow of other paid-in capital following the listing, the debt-to-equity ratio will also decrease, which will enable more active financial activities.

From this point of view, this IPO looks like a pretty attractive opportunity.

There have been various controversies over the listing of LG Ensol, but in the end, you will be evaluated according to how you grow using the funds raised through the IPO.

Of course, there are plenty of risks because the subscription for public offering is also an investment in risky assets.

In the prospectus, various risks are specified, such as COVID19, slowing growth of the secondary battery industry, decreasing demand for downstream industries, fire risk for lithium-ion batteries, intensifying competition, and risk of falling battery prices.

You should consider these risks well and participate in this IPO.

One way or another, if LG Ensol is listed, it is expected that the 2nd and 3rd places in the domestic securities market will be reversed.

I hope that the three Korean companies will continue to be active in the battery industry and become a great growth engine for Korea in the future.