Volkswagen AG’s diesel emissions scandal is a blessing for South Korea’s LG Chem Ltd., whose success selling electric-vehicle batteries made it a stock-market favorite in 2015.

The world’s third-largest producer of the auto part is the second-most bought stock by foreigners this year on the benchmark index after Naver Corp., data compiled by Bloomberg show. The shares surged 74 percent this year, the most in six years and beating a 3.9 percent loss in the MSCI World Chemicals Index. It may rise 13 percent in the next 12 months, according to the consensus of 23 analyst estimates compiled by Bloomberg.

LG Chem this month raised its 2016 sales target for mid- to large-sized batteries by 20 percent amid demand for clean-fuel cars. The global market for electric vehicles may more than triple to 8.5 million units by 2020, SNE Research estimates. Fitch Ratings Ltd.said Volkswagen’s troubles may accelerate that growth and could prove a turning point for the auto sector worldwide.

“Volkswagen’s emissions scandal is giving a lift to LG Chem as more attention has been given to electric vehicles,”said Lee Chung Jai, an analyst at KTB Investment & Securities Co. in Seoul. “Although it will take a while for the company to reflect profits from the segment on its earnings in the short term, we will see an increase in earnings next year.”

LG Chem raised its 2016 sales forecast for mid- to large- sized batteries to 1.2 trillion won after exceeding this year’s goal of 700 billion won. Operating profit will rise 45 percent to 1.9 trillion won in 2015 and then to 2.2 trillion won next year, according to analyst estimates compiled by Bloomberg. Lower costs amid weak oil prices will also help maintain steady margins in its mainstay petrochemicals business, according to IBK Securities Co.

Foreign investors’ net purchases of LG Chem shares amounted to 794.8 billion won this year, close to the 804 billion won for Naver, the data show. Out of 36 analysts tracked by Bloomberg, 34 have a buy rating, with one sell and one hold. The chemicals maker trades at 20.1 times reported earnings, compared with a multiple of 17.5 for the benchmark Kospi. It outperformed rivals including BASF SE and Dow Chemical Co., hitting a two-year high of 315,000 won this week. Japan’s Panasonic Corp., the world’s top EV-battery maker, fell 2.7 percent this year.

Audi AG, the largest contributor to Volkswagen’s earnings, this month said it will boost its electric-car lineup as an “answer to the diesel issue.” EV sales in China, the world’s biggest auto market, may surge as much as 70 percent annually on average through 2020, Bloomberg Intelligence estimates.

LG Chem supplies to about 20 automakers including Audi, General Motors Co. and SAIC Motor Corp. and in August signed a deal with China’s Chongqing Changan Automobile Co. The company, which has an annual capacity to supply high-performance EV batteries to about 180,000 cars from its plants in Korea, China and the U.S., plans to expand capacity at its Nanjing plant by more than four times by 2020 and make accumulated sales of 10 trillion won from 2014 to 2018.

“The crucial matter is how quickly LG Chem can cut production costs and improve its economies of scale to mitigate falling battery prices,” said Daniel Lee, an analyst at Korea Investment & Securities Co. “Although its battery division will probably reach its break-even point some time next year, we will only see improved earnings when all those factors come into play, allowing the company to secure profitability.”

Operating profit margin from LG Chem’s battery operations may improve to 3.5 percent in 2016 and 5 percent in 2017 from a loss of 0.7 percent in 2015, according to Hyundai Securities Co. The segment will account for 18 percent of the company’s operating profit by 2020 from 5 percent in 2014, Hyundai estimates.

“Shares will probably do even better next year,” said Choi Ji Hwan, an analyst at NH Investment & Securities Co. in Seoul. “LG Chem is the frontrunner among other chemical companies as its operations in mid- to large-sized batteries have been typically doing well, raising market expectations that there will be a further growth.”

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