[Edaily Reporter Park Jung-Soo ] On the 8th, Daol Investment & Securities projected that LG Energy Solution(373220)’s second-quarter earnings had bottomed out and that earnings improvement, driven primarily by energy storage systems (ESS) and small batteries, would begin in earnest starting in the second half of the year. The firm maintained its “Buy” investment rating and target price of 550,000 won.
Yoo Ji-woong, an analyst at Daol Investment & Securities, stated, “Second-quarter operating profit of 113.3 billion won effectively marks the trough,” adding, “Starting in the third quarter, a simultaneous recovery in the ESS and electric vehicle (EV) businesses will continue the trend of profit improvement.”
LG Energy Solution’s second-quarter revenue reached 7.6 trillion won, up 24.8% year-over-year and 15.3% quarter-over-quarter. Operating profit stood at 113.3 billion won. The Advanced Manufacturing Tax Credit (AMPC) of 241 billion won was factored into this figure; excluding this, the company posted an operating loss of 127.7 billion won. However, given that battery supplies to GM—which had been the company’s largest customer through the first half of last year—had not yet returned to normal, the results are considered better than expected.
Daol Investment & Securities identified small-sized batteries as the core business driving third-quarter revenue growth. It estimated that the automotive EV battery, ESS, and small-sized battery segments would contribute to revenue increases of approximately 50 billion won, 400 billion won, and 600 billion won, respectively. In particular, the firm projected that profitability in the small-sized battery segment would improve due to the recovery of sales in China by major customers and the expansion of production capacity at European plants.
The firm also forecast that the ESS business would continue its growth trend. Analyst Yoo Ji-woong explained, “The increase in ESS volume is expected to continue in the third quarter, and operating profit—excluding AMPC—is nearing the break-even point (BEP).” He added, “In the mid-to-large-sized battery segment, the cost ratio will improve rapidly due to rising demand for mid-nickel vehicles in Europe, increased utilization rates at the Polish plant, and the resumption of battery supplies to GM.”
Analyst Yoo assessed, “Operating profit has effectively entered a turnaround phase,” adding, “Starting in the third quarter, the resumption of EV sales in the U.S. by traditional automakers such as GM, combined with the growth momentum of the ESS business, will bring various factors for stock revaluation to the forefront.” He further projected, “As the small-sized battery division continues to perform well, the company’s overall break-even point is expected to be reached close to the company’s guidance.”