Global investment bank Goldman Sachs downgraded its investment recommendation on L&F to 'sell' due to a lack of product differentiation and concerns over financial soundness.
According to the financial investment industry on the 8th, Goldman Sachs lowered its target price for L&F from the previous 80,000 won to 40,000 won, stating this. This is nearly 30% lower than L&F's closing price of 56,800 won on the 5th.
Goldman Sachs identified customer concentration as a core risk factor for L&F. This is due to LG Energy Solution accounting for over 80% of L&F's sales last year. L&F's previous efforts to diversify its customers included Tesla, which is delaying the expansion of its own battery cell production, and Northvolt, which has gone bankrupt.
Goldman Sachs noted that L&F lacks product differentiation in a situation without new customers or a new product pipeline. Additionally, it predicted that L&F's debt ratio would reach 376% by 2026 and the interest coverage ratio would only be 0.3. The interest coverage ratio is the value obtained by dividing operating profit by interest expense. A value below 1 means that the profits for the year cannot cover the interest.
Goldman Sachs, however, mentioned that in the short term, if there is a supply shortage from competitors or if the Korean won appreciates, L&F's profitability or stock price may rebound.
Goldman Sachs forecasted that the Korean secondary battery industry, including L&F, would face overall difficulties. In the European market, imports of lithium iron phosphate (LFP) batteries from China have surged, while in the U.S. market, despite the Inflation Reduction Act (IRA), the total addressable market (TAM) may show weakness.
Goldman Sachs' investment recommendations and target prices for domestic secondary battery companies are ▲ LG CHEM buy 330,000 won ▲ Samsung SDI buy 260,000 won ▲ LG Energy Solution hold 345,000 won ▲ SK Innovation sell 55,000 won ▲ ECOPRO BM sell 60,000 won ▲ POSCO FUTURE M sell 70,000 won.