Daily Brief South Korea: LG Energy Solution, Coupang, Naver Corp and more

In today’s briefing:

Assessing LG Energy Solution’s Flow Imbalance Situation

LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.

South Korea’s largest e-commerce company, Coupang (CPNG US) is no longer a growth stock with revenue expected to start falling on a YoY basis from 4Q22 onwards.
Therefore, we think Coupang’s current valuation, which is based on inflated revenue estimates should become redundant.
We think a no-growth, low-margin business like Coupang does not deserve to trade north of 10.0x OP, whereas it is currently trading at 15.6x the best-case OP estimate.

Naver Corp (035420 KS) (market cap of 28.9 trillion won or $20.9 billion) is our 2023 high conviction play.
In this report, we provide a deep-dive analysis of Naver Corp and why we believe this stock has an attractive upside of 30%+ by the end of 2023.
Having followed the company for many years, I often like to think of Naver as“The Genius Turtle.”

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