Electric Car Battery maker LG Chemical

1. IPO of CATL in SHENZHEN Exchange

In this Monday, CATL, Chinese Electric Car Battery maker, started its trading as listed company.

Shareprice rose by 44% which is limited by the exchange, in the day.

The listing gave hopes for Japanese and Korean battery makers like Panasonic (6752.TK) , LG Chemical (051910.KS) or Samsung SDI (006400.KS) about re-estimating thier battery business.

Shareprice of Samsung SDI, which is one of  Samsung affiliate and focus on battery manufacturing, has risen more than 20% from end-Apr.

LG Chemical also has risen about 13% from the time.

Panasonic and SKI (096770.KS) have been less than or about 10%.

2. George Soros was right in this time too

NASDAQ are too strong nowadays, and Tesla too.

Tesla is approaching to the highest price which it recorded before.

Nobody know whether Tesla could keep this rally or not.

But its strength show enthusiasm which the market have for electric vehicles.

3. The battery is a core in the business

For the vehicles, the batteries are core part.

And the batteries are so expensive that traditional car companies can't gain appropriate margin as much as Gasoline and Diesel.

And I think it is the difficultiest problem for the second movers like Ford, GM or Hyundai in now.

But it's good for battery makers.

For now, automobile makers don't have enough compromise power, so battery makers can gain high margin for their products.

CATL's margin in last year was about 35 percent.

4. margins of Korean makers aren't that good, but

The margins of Korean makers aren't that good because of geopolitical issue from THAAD and protectionsim of Chinese government about their own industry.

Less than 20 percent in revenues of LG Chemical was from Electric Car Battery and margin in the business was less than 1 percent.

But there would be diffrence in this year.

THAAD problem is being solved, and LG Chemical, Samsung SDI, SKI were included in White-list again.

This would be cornerstone for re-starting subsidies.

And they don't just sit there and look at China continuously.

For example, LG Chemical is in negotiation with Volks Wagen in now.

5. Main business of LG Chemical has positive outlook too.

The main reason why people showed concern over the petro-chem company was too high oil price which leads to decreasing the company's operating margin.

Oil price entered to down- trend already, and this will be continued because there isn't a thing to reverse the trend.

Besides, unlike other EM currencies, power of KRW which is preserving high value also make burden from Oil price relatively light.

I suggest BUY and my target price is ₩450,000.