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NH Investment & Securities evaluated the recent surge in LG Chems stock price, attributing it to the rising value of its subsidiary stakes and the potential for enhanced utilization. Analyst Choi Young-kwang noted that energy storage systems (ESS) are emerging as a breakthrough to escape the sluggish market caused by the slowdown in electric vehicle (EV) demand. Although LG Chems cathode chemistry does not directly benefit from lithium iron phosphate (LFP) but rather from nickel-cobalt-manganese (NCM), the anticipated increase in ESS battery sales could indirectly benefit LG Energy Solution through an increase in stake value.

Choi further explained that while there is an inevitable discount related to the dual listing of LG Chems stake in LG Energy Solution, the advocacy from activist funds to enhance corporate value could act as a factor in reducing this discount by increasing the potential for efficient utilization of underperforming assets. It is expected that demands for improving asset efficiency will continue to rise from a medium to long-term perspective.

On the 1st of this month, LG Chem announced its decision to dispose of 2.46% of its stake in LG Energy Solution through a stock price swap (PRS) contract, along with plans for funding related to this transaction.

Choi added that if further plans for stake liquidity are announced in the future, there may be additional reductions in discounts or improvements in financial structure and cash flow through the effective reallocation of inefficiently placed assets, as well as enhancements in shareholder returns.

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