Investment highlights
4Q19 results missed consensus due to the bigger-than-anticipated recognition of the ESS fire-related provision (KRW300bn). EV batteries reported a slight loss. The yield of the Polish plant appears to be normalizing.
In 1Q20, profitability is expected to worsen due to the coronavirus outbreak and an escalating fixed cost burden stemming from the aggressive capacity expansion for rechargeable batteries. For our target EV/EBITDA multiple for the rechargeable business, we applied a 30% discount to peer CATL’s multiple. We raise our target price to KRW470,000 while presenting the company as our conviction call.
Major issues