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| LG Energy Solution CEO Kwon Young-soo and the firm's business executives join an online press conference to mark its planned initial public offering, Monday. Yonhap |
By Lee Kyung-min
LG Energy Solution (LGES), a wholly owned subsidiary of LG Chem, will be able to dethrone its Chinese competitor, CATL, the global top electric vehicle (EV) battery manufacturer, the firm's CEO said Monday.
The LG subsidiary's capability is unmatched by its market peers, as clearly illustrated by a variety of intellectual property rights over key technologies that have earned the trust of clients and partner firms in the U.S. and across Europe, LGES CEO and Vice President Kwon Young-soo said.
"We have clients in key global markets encompassing Europe, the U.S, and China, unlike CATL whose growth strategy is defined by heavy reliance on government policy whereby Chinese carmakers were mandated to use domestically produced batteries only," he said in a press conference held virtually at company headquarters in Seoul.
The future prospect of the LG subsidiary overtaking the current top player in the next few years will advance faster than expected, underpinned by strengthened manufacturing capabilities in key countries, outstanding quality control backed by highly skilled engineers and trust-oriented client relations, he said.
"We have advance orders to the amount of 260 trillion won as of this year, an indication of strong global demand for our products time-tested in the global market."
Kwon acknowledged lingering concerns about the firm falling behind CATL in terms of profit margins, an issue he says is certain to be resolved since the Chinese firm will have to open itself up to a global competition far fiercer without the full backing of the state policy assistance.
"I have been asked frequently about why our firm's profits are less than CATL's, a shared concern of overseas investors. That is because CATL can keep the prices of the final goods under control, primarily because it uses cheap labor, materials and equipment in the country with a customer base that are not allowed other options. Such perks will no longer be found in the global competition," he added.
LG Chem will recover from a recent dive in its stock price, a result many market participants and analysts have identified as fallout from the energy subsidiary's separation, Kwon said.
"I understand that many investors have sold off LG Chem shares to invest with us. But the sluggish prices will bounce back, since LG Chem has an 82 percent stake in our firm."
SK Securities analyst Yoon Hyuk-jin expects the market capitalization of LGES upon KOSPI listing will amount to 100 trillion ($83 billion), buoyed by robust demand for the U.S. manufacturing of EVs.
The U.S. government plans to expand the Buy American Act whereby taxes will be reduced on products manufactured by American workers in the U.S., a reason for a brighter prospect for the firm with hefty investment plans in the form of building more factories in the U.S.
"Almost half of EVs sold in the U.S. after 2025 will use LGES batteries, if the firm's business pushes forward without major adjustments," he said.
Corporate profit will soar in the next few years, lifted by the full operation of the firm's joint ventures and factories in the U.S. scheduled for 2025, he added.
"The sales of the firm last year are believed to be about 17.8 trillion won, with 1 trillion won in operating profit. It is expected to register an average annual sales growth of 24 percent by 2025. Shares upon listing will undergo some volatility but the gap in corporate value between its global competitors will narrow, conditioned upon the effective management of a slew of risk factors, notably product recalls due to fire-prone batteries and stable supply of key materials such as lithium and nickel," he added.
LGES will be listed late this month, following a book building of institutional investors Friday.
The total number of publicly offered shares will be 42.5 million. The desired per-share price will be between 257,000 won and 300,000 won, raising up to 12.75 trillion won as a result.
LG Chem shares closed at 710,000 won, Monday, down 1.25 percent from the previous session. It hit a nearly 13-month low of 611,000 won on Dec. 30.
