On the 6th, Lee Jin-myung, an analyst at Shinhan Investment Securities, stated, “The second half of the year marks a phase where order intake and earnings growth in the ESS business will gain momentum,” adding, “While the structural growth potential of the ESS business remains valid, normalizing profitability and reducing losses in the automotive battery segment are necessary for a stock re-rating.”
Shinhan Investment Securities projected that LG Energy Solution’s second-quarter revenue would reach 7.7 trillion won, an 18% increase from the previous quarter, and that operating profit would turn positive at 246 billion won. This exceeds the market consensus of 203.4 billion won in operating profit.
Revenue in the mid-to-large-sized battery segment is expected to reach 5.5 trillion won, a 21% increase from the previous quarter, with operating profit turning to a profit of 96.5 billion won.
For electric vehicle (EV) batteries, despite sluggishness in the U.S. EV market, revenue is projected to rise 8% quarter-over-quarter to 3.1 trillion won, driven by a recovery in shipments to Europe and compensation payments, with profitability also expected to improve.
Revenue from energy storage systems (ESS) is projected to rise 43% quarter-over-quarter to 2.4 trillion won, driven by the expanded operation of new production lines in North America and the easing of pack bottlenecks. Analysts expect operating profit to return to the black despite fixed-cost pressures, thanks to factors such as the expansion of the Advanced Manufacturing Production Tax Credit (AMPC) (262 billion won, a 38% increase from the previous quarter).
The analyst explained, “With large-scale orders continuing, such as the contract with DTE Energy (6 gigawatt-hours (GWh)), we expect ESS revenue in the second half of the year to increase by 46% compared to the first half.” He added, “However, while profitability will remain weak through the second quarter due to line conversion costs and other factors, we anticipate a turnaround driven by rising utilization rates and the expansion of the AMPC.”
The analyst continued, “In the EV sector, despite low utilization rates at U.S. plants, the trend of quarterly performance improvement remains valid due to expanded shipments of mid-nickel and lithium iron phosphate (LFP) batteries to Europe, as well as strong shipments of cylindrical batteries (for Tesla).”
In the small-format battery segment, the company projected that increased shipments of cylindrical batteries—driven by strong sales in Europe and Asia by its client, Tesla—would contribute to improved company-wide performance. Second-quarter revenue for the small-format battery segment is expected to reach 2.2 trillion won, an 11% increase from the previous quarter, while operating profit is projected to rise 17% quarter-over-quarter to 149.5 billion won.
