IBK Investment Securities upgraded L&F (KOSDAQ: 066970) to "Buy" on the 7th, lifting its target price from 120,000 won to 130,000 won, citing the anticipated ramp-up of the company's lithium iron phosphate (LFP) cathode supply into the North American market.
A disappointing quarter, but not a structural setback
L&F reported revenue of 885bn won and operating profit of 21bn won for the second quarter of 2026 (April–June). Revenue rose 19.7% from the previous quarter, but operating profit collapsed 82.2% over the same period, leaving an operating margin of just 2.4%, down 13.5 percentage points from 15.9% in the first quarter.
The results fell well short of market consensus (revenue: 941bn won; operating profit: 50bn won). One-off costs totalling 18bn won were largely to blame: a 14bn won inventory write-down on raw materials including lithium, and 4bn won in start-up costs related to the new LFP business. Stripping out these items, IBK estimates the underlying operating margin at 3.9%, suggesting the company's core fundamentals remain intact.
Investors should nonetheless monitor whether inventory write-downs prove recurring. If lithium prices fail to recover from their current lows — or fall further — similar losses could reappear in the third quarter. L&F's debt-to-equity ratio stood at 373% as of the first quarter of this year, sharply higher than the roughly 200% recorded before 2023, owing to a heavy capital expenditure programme. The ratio is projected to reach 611% by the end of 2026. Should the LFP business fail to monetise as expected, the financial burden could intensify — a risk investors cannot afford to ignore.
Third quarter poised for a sharp rebound
The near-term outlook is more encouraging. IBK forecasts third-quarter (July–September) revenue of 906bn won, operating profit of 41bn won, and an operating margin of 4.5% — implying a 95.7% quarter-on-quarter recovery in operating profit. Two factors drive this: the disappearance of one-off charges and, critically, the first quarter in which LFP cathode sales will be reflected in the results.
L&F is set to begin shipping LFP cathode materials for North American energy storage systems (ESS) from the end of the third quarter. Annual shipments of 5,000 tonnes are expected for 2026, rising sharply to 50,000 tonnes in 2027. Current North American LFP production capacity stands at 30,000 tonnes per year, with plans to double it to 60,000 tonnes by the end of the first quarter of 2027. IBK projects that utilisation rates at the expanded North American LFP facility will reach 96% once the expansion is complete.
Ternary cathode business also holding firm
L&F's conventional ternary cathode segment — which uses nickel, cobalt, and manganese alongside lithium — is also performing better than feared. Concerns had grown that a key customer might diversify its supplier base following the entry of rivals, but the company has confirmed it will retain sole-supplier status through the third quarter. IBK has accordingly raised its 2026 ternary cathode shipment forecast to 92,000 tonnes, implying 30% year-on-year growth and surpassing the company's own initial guidance of 20% growth.
Demand signals are encouraging. A leading European electric-vehicle manufacturer (identified only as "Company T") ranked second in sales in July, providing a solid demand backdrop. Broadening applications — including North American 46-millimetre cylindrical battery cells and single-crystal cathode materials — offer additional tailwinds for shipment volumes.
Turnaround in prospect, but the third quarter is the real test
The full-year outlook points to a meaningful recovery. IBK forecasts 2026 revenue of 3.438tn won, up 59.6% year on year, with operating profit of 222bn won — marking a return to profitability after two consecutive years of heavy losses (operating losses of 559bn won in 2024 and 157bn won in 2025, driven by weak cathode markets, falling lithium prices, and customer destocking). By 2027, revenue is expected to reach 4.7tn won, with operating profit of 273bn won.
For this turnaround to materialise, both the LFP business and the ternary cathode volumes must deliver simultaneously. The third quarter will serve as the most meaningful test yet of whether L&F's recovery is on track.
The 130,000 won target price is derived by applying a price-to-earnings multiple of 24 times — in line with the global average for materials-sector peers — to an estimated 2028 earnings per share of 5,383 won. That implies upside of 63% from the closing price of 79,800 won on 6th August.