Samsung Electronics lags despite record earnings as battery stocks surge

Samsung Electronics shares are struggling to gain traction despite record-breaking earnings, while battery stocks led by LG Energy Solution are advancing sharply.

According to Korea Exchange, LG Energy Solution shares were trading up 5.37 percent at 412,000 won ($308) as of 10:34 a.m. Thursday. The stock climbed as high as 418,000 won in early trading.

The catalyst was LG Energy Solution's preliminary third-quarter earnings, released Thursday. The company reported consolidated sales of 9.64 trillion won and operating profit of 756 billion won for the July-September period, up 59 percent and 25.7 percent, respectively, from a year earlier.

It marks the first time LG Energy Solution has surpassed 9 trillion won in quarterly sales. Operating profit, excluding an estimated 416.9 billion won in advanced manufacturing production credits under the US Inflation Reduction Act, still came in at around 300 billion won, swinging back to profit from a loss in the second quarter.

Growth in mid-nickel battery volumes for European electric vehicle customers continued, while the launch of North American joint ventures with General Motors and Hyundai Motor drove the sales increase. Expanded production capacity for energy storage systems in North America also contributed.

"Of the new order target of 90 gigawatt-hours, about 30 gigawatt-hours were secured in the first half, with the remaining projects expected to concentrate in the second half," said Lee Jin-myeong, a senior researcher at Shinhan Securities. "A return to profit excluding AMPC is expected in the fourth quarter, with near-term ESS and cylindrical cells followed by mid- to long-term North American ESS and the 46-series driving growth."

Ahn Hoe-su, a researcher at DB Securities, said LG Energy Solution is well positioned to benefit from US grid security policy, given its early expansion of ESS capacity in the United States and its move into the systems integration business. "A premium is justified when considering the peer multiples of US systems integrators such as Tesla and Fluence Energy, and order momentum should also concentrate in the second half," he said.

The strong rebound in LG Energy Solution, the sector's bellwether, has spread buying interest across the battery space, with Samsung SDI and SK Innovation also advancing.

Samsung SDI was up 4.27 percent at 586,000 won at the same time. SK Innovation, the parent of SK On, gained 1.50 percent to 162,000 won. Battery materials producers Ecopro BM and LnF also rose, up 3.61 percent and 0.77 percent, respectively.

Market watchers expect the battery industry, which endured a prolonged slump amid a temporary slowdown in electric vehicle demand, to enter a genuine recovery phase as it finds new growth avenues in the ESS market. Analysts also say Korean battery and materials companies stand to benefit in the medium to long term once the EU's Industrial Acceleration Act takes full effect.

The act aims to restore manufacturing competitiveness within the EU and stabilize supply chains by introducing "made in Europe" standards. A formal draft was submitted in March, and detailed criteria are currently being discussed in the European Parliament and the EU Council.

Under the draft, vehicles covered by the act must be finally assembled within Europe, and key components — including battery parts — must meet a minimum EU-origin threshold.

"LG Energy Solution, Samsung SDI and SK On have secured large-scale cell production capacity centered on Poland and Hungary, allowing them to respond immediately compared with rivals that would need to build new factories," said Lee Hyeon-uk, a researcher at IBK Securities. "Cathode material makers are also expected to benefit over the medium to long term."