Japanese investment bank Nomura has named a battery stock that it believes is set to emerge with increased adoption of electric vehicles. The bank estimates that global electric vehicle penetration will reach 27.2% in 2030, up from 11.8% in 2022, driven by the “irreversible trend” of carbon neutrality. In a note from June 22, Nomura analysts, led by Cindy Park, said they expect demand for electric vehicle batteries to grow 25% through 2025 — implying strong growth in battery and materials stocks. In addition, the industry is also set to be more profitable, with Nomura expecting EBIT (earnings before interest and tax) margins to reach 7.8% in 2030, up from 4.9% this year. “We believe EV battery and material performance is likely to outperform EV penetration, improved economies of scale, and metal price stability. While we have buy ratings on all battery/material stocks we cover, we prefer companies exposed to popular EV models. [such as] of Tesla and BYD, as well as “leading companies” with significant capacity expansion/earnings growth in 2023,” the bank said. The bank also said it expects some battery manufacturers “to show more flexibility in earnings/equity performance in economic times.” Macro.” Uncertainty.” Stock Picks In the battery space, contemporary Chinese battery giant Nomura likes Amperex Technology (CATL). The bank believes that CATL’s “global leading position” will remain intact in the long term, given the company’s commitment to modernizing technology, strong relationships with top-tier automakers, and its enhanced ecosystem. It means a potential 8.9% rise for the stock’s closing price of around CNY 537 on June 23. Nomura also likes South Korea’s LG Energy as a beneficiary of increased electrification of cars worldwide and increased demand for electric car batteries. The bank expects the company to grow its net profit by 61% annually through 2024. The stock closed at KRW 400,000 ($307) on June 23, indicating a potential rise of 61.3% to Nomura’s price target of KRW 645,000. LG Chem – the parent company of LG Energy – is also on the bank’s list. The bank believes that the stock appears undervalued in relation to the growth potential of the cathode, chemicals and batteries business. The company expects to increase its dividends from its cathode and batteries by 62% annually through 2024. Shares of the company closed at KRW 551,000 Thursday, which is a potential 67% higher than Nomura’s target price of KRW 920,000. China’s second largest battery supplier BYD is another stock that Nomura favors. The electric car maker is also backed by Warren Buffett’s Berkshire Hathaway company. Read more BYD sells several electric cars, and it has become one of the three largest automakers in China. The bank likes its number of new models and the vertically integrated business model. She pointed out that the company’s sales growth was not affected by the two rounds of price hikes this year. Moreover, various financial incentives to purchase electric vehicles from local governments in China should help maintain the competitiveness of electric vehicles versus vehicles powered by fossil fuels, the bank added. Nomura has a price target of HK$360 ($45.90) per share, which represents a potential upside of 16.1% to the stock’s closing price of HK$310 on June 23.
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