With battery prices rising but demand for electric vehicles showing no signs of slowing down, Goldman Sachs analysts have named their top stocks to capitalize on this trend. Goldman Sachs has raised its forecast of the global average price of battery packs by 8% to 26% by 2025, with the bank expecting battery prices to peak in 2023. It noted that while technology and chemistry improvements have led to a decline in battery prices, about 40% of the cost deflation was offset by higher raw material prices. Despite higher battery prices, Goldman said demand for EVs remains strong, supported by recent strong oil prices. “Global demand for cars today exceeds supply, with electric vehicle sales still following double-digit growth,” Goldman analysts, led by Nikhil Bhandari, said in a research paper on June 1. “Electric vehicle sales remain the bright spot in broader car sales – while growth rates have slowed from 2021 levels, March sales were still 29% year-on-year,” he added. The bank noted that the balance of power appears to be shifting from automakers to battery makers, especially in the ex-China market where demand for batteries is tight, the battery industry is more consolidated and where most of the cost of battery materials is now passed on. to the car manufacturers. Goldman’s top pick in the battery space is South Korea’s LG Chem. The bank likes the company for its “unique portfolio” of exposure to tight and fast-growing chemicals and materials. The bank also expects the company to deliver 37% compound earnings before interest, taxes, depreciation and amortization by 2025 – “one of the highest” in global diversified chemicals and EV batteries and materials. The bank also expects the company’s battery equipment operating margin to grow from 4.6% in 2021 to 7.8% in 2026. Goldman believes that the company offers a more favorable risk return relative to its competitors from a valuation perspective. and notes that the stock offers a “top quartile.” growth in lower quartile valuations.” The bank has a price target of 760,000 South Korean Won ($610.50) for the stock, which shows a potential upside potential of 30% from its closing price of 585,000 South Korean Won on 1 June.
Electric vehicles were central during the green transition.
Caroline Brehman | CQ Roll Call, Inc. † Getty Images
With battery prices rising but demand for electric vehicles showing no signs of slowing down, Goldman Sachs analysts have named their top stocks to capitalize on this trend.
