Battery-related shares climbed on the 13th even as South Korea's stock market plunged on heavy selling in large-cap chipmakers, highlighting a sharp divergence between the two sectors. Samsung Electronics (005930.KS) and SK hynix (000660.KS) bore the brunt of selling on concerns over expanding memory chip supply from China, while buyers moved into battery stocks on expectations for growth in the energy storage system (ESS) market and improving earnings.
LG Energy Solution (373220.KS) closed at 410,000 won on the 13th, up 3.02% from the previous session, according to the Korea Exchange on the 14th. SK Innovation (096770.KS) ended 2.62% higher at 156,800 won. L&F, a battery materials maker, rose 2.25% to 109,300 won. The gains stood out as the KOSPI tumbled more than 5%.
Samsung Electronics and SK hynix, by contrast, fell sharply on worries that China's ChangXin Memory Technologies (CXMT) could develop next-generation DRAM and expand supply. Foreign investors led a wave of selling as concerns mounted over intensifying competition in the global memory market and the possibility that the chip cycle has peaked. The KOSPI closed at 6,035.35 on the 13th, down 5.46%, and a sell-side sidecar was triggered during the session.
Analysts attribute the strength in battery shares to expectations of an earnings recovery driven by the expanding ESS market. Sentiment toward LG Energy Solution improved in particular after its preliminary third-quarter results came in far above market forecasts. The company posted third-quarter revenue of 9.6 trillion won ($6.7 billion) and operating profit of 756 billion won ($528 million), up 28% and 567% from the previous quarter, respectively.
News that LG Energy Solution and L&F are moving toward a large supply contract also appeared to support the shares. The two companies plan to sign a multiyear contract this month for up to several hundred thousand tons of lithium iron phosphate (LFP) cathode material, industry sources said on the 13th. The contract is expected to be worth trillions of won. It would be the first LFP cathode supply deal between the two companies, fueling expectations for a stronger domestic battery materials supply chain aimed at the North American ESS market.
Earnings expectations are also underpinning SK Innovation. iM Securities raised its target price for the company to 250,000 won from 190,000 won on the 12th, an increase of 31.6%. The brokerage cited strong performance in the refining and lubricants businesses, along with improving profitability at subsidiary SK E&S following the start of commercial operations at the Barossa gas field in Australia.
Some analysts caution that gains in a handful of stocks are not enough to confirm a broad turnaround for the battery sector. With the pace of recovery in electric vehicle demand still uncertain and earnings improvements varying widely by company, share performance from here will likely depend on how far firms can expand their ESS businesses and restore profitability.
