SDI, LG Chem to Gain on Battery Sales, Korea Investment Says
March 09, 2010, 10:46 PM ESTBy Saeromi Shin
March 10 (Bloomberg) -- South Korean rechargeable battery makers’ stocks will outperform the benchmark index on increased use in mobile devices, autos and electricity grids, according to Korea Investment Trust Management Co.
Samsung SDI Co. and LG Chem Ltd. will beat the Kospi Index this year because of an expanding market for higher-capacity batteries used in smartphones and tablet computers such as Apple Inc.’s iPad, Korea Investment’s portfolio manager Lee Young Seog said. Electric vehicles and increased storage in electricity networks will start to boost shipments in coming years, he said.
“I’m most optimistic about rechargeable battery makers in what will be an overall range-bound market” this year, Lee, manager of the third-best performing major fund investing in South Korean stocks, said by phone today. “Demand from various mobile devices will help maintain stable margins.”
The Kospi has retreated 3.9 percent from the 19-month high on Jan. 21 on concern global growth that propelled a 50 percent gain last year may stall. The equities fell amid concern China’s efforts to limit bank lending and European austerity measures to curb government deficits will trim South Korean exports.
The Korean gauge fell 0.4 percent as of 12:10 a.m. local time.
Lee’s KITM Meister Securities Investment Trust’s return over the past six months is the third-best performer among 183 funds with assets greater than 50 billion won ($44 million) that are focused on South Korean stocks, according to data compiled by Bloomberg. The fund has gained 75 percent over the past year, compared with a 51 percent advance in the Kospi.
Share Performance
The expanding market for better batteries will “outweigh concern” that the outlook for Suwon, South Korea-based Samsung SDI and Seoul-based LG Chem is limited because their shares surged last year. Samsung SDI, which advanced 170 percent in 2009, ranks third among the KITM Meister fund’s holdings. LG Chem, which gained 126 percent last year, is sixth, Lee said.
Bayerische Motoren Werke AG selected SB LiMotive Co., a venture between Robert Bosch GmbH and Samsung SDI, to make batteries for its electric vehicles for eight years starting in 2013. LG Chem started delivering batteries to Hyundai Motor Co. and Kia Motors Corp. last year. The company also signed supply contracts with General Motors Co., Eaton Corp. and China-based Chongqing Changan Automobile Co.
Global smartphone shipments are expected to rise 36 percent to 246.9 million units in 2010, research firm ISuppli Corp. said in February. Samsung Electronics Co. plans to offer a tablet computer to ride the wave of demand it expects for Apple’s iPad that goes on sale in the U.S. on April 3.
Obama
South Korea’s investment in renewable energy has drawn the attention of U.S. President Barack Obama, who said in his first address to a joint session of Congress on Feb. 24 last year that while the country invested in new green technology, it’s falling behind Korea, Germany and Japan in producing more of these products.
Obama in October announced $3.4 billion in government grants to develop and install “smart-grid” technology to make electricity transmission more reliable and aid the delivery of energy generated from sources like wind and solar power.
U.K. electricity network operators need to invest 6.5 billion pounds ($9.7 billion) over the next five years to upgrade the country’s infrastructure, the London-based Office of Gas and Electricity Markets, the market regulator, said in August.
“We may start to see a strong, structural growth of electric vehicles and energy storage demand from smart grids starting in 2012,” Lee said. “Valuations are cheap compared with their global peers.”
Samsung SDI is trading at 1.3 times book value, while LG Chem is at 3.5 times, less than the 9.7 multiple for BYD Co., the Chinese battery maker backed by Warren Buffett that plans to start selling electric and hybrid cars in Western Europe next year.
--Editor: Reinie Booysen
To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net
To contact the editor responsible for this story: Linus Chua in at lchua@bloomberg.net
