ESS Hits Bottom, EV Lines Restart... LG Energy Solution Eyes Turnaround in Q3 [Click e Stock]

ESS Profitability Rebounds from Bottleneck
New EV Projects in Europe, Ultium Lines Restarted
4680 Battery Market Growing Faster Than Expected

After having lowered expectations for two consecutive quarters, LG Energy Solution is now seeing renewed hopes for a "surprise performance." This change comes as profitability in its North American energy storage system (ESS) business, which had previously held back its performance, is improving, and its electric vehicle (EV) battery production lines are also starting to resume operations.

On September 16, Mirae Asset Securities maintained its target share price for LG Energy Solution at 5.1 million won and kept its investment rating as "Buy." The previous day's closing price was 366,000 won. Notably, the earnings outlook for the third quarter was raised significantly. The expected figures are 8.9 trillion won in revenue and 403.7 billion won in operating profit. Operating profit is projected to be well above both the previous estimate of 223 billion won and the consensus market forecast of 290 billion won.

The turning point is the ESS business. While North American ESS had been a bottleneck for the past two quarters due to initial ramp-up costs, profitability is expected to improve significantly starting in the third quarter. Additionally, new EV projects are being launched in Europe, led by Volkswagen, and the Ultium battery lines in North America are being restarted. This is expected to reduce losses, and recognition of the U.S. Advanced Manufacturing Production Credit (AMPC) is also projected to rise again.

The small battery segment is also adding strength. Sales of new Tesla models are strong in Europe and other regions, which is expected to sustain high utilization rates and profitability. Mirae Asset Securities predicts that this trend will continue through the fourth quarter, with this year's annual operating profit at around 1.2 trillion won—surpassing the market expectation of about 800 billion won.

The 4680 cylindrical battery is also highlighted as a key focus. Recently, as Tesla expands into autonomous driving and robotaxi operations, interest in the 4680 battery market has been rising again. LG Energy Solution is increasing the utilization rate of its Ochang 4680 line, and by year-end, a 10 gigawatt-hour (GWh) scale 4680 line in Arizona, U.S., is planned to commence operation. Mirae Asset Securities especially noted the rapidly growing customer interest in the 4680 battery. Chuljoong Kim, analyst at Mirae Asset Securities, said, “We have entered a phase where the ordered volumes of 4680 batteries from several customers are being reflected in earnings," adding, "The actual pace of orders and customer diversification is at least one and a half to two years ahead of market expectations."

This content was produced with the assistance of AI translation services.