"LG Energy Solution Posts 'Strong Results' Even Excluding Stellantis Compensation; Target Price Raised" [Click e Stock]

Eugene Investment & Securities raises target price from KRW 470,000 to
KRW 530,000

Eugene Investment & Securities maintained its Buy rating on LG Energy Solution on October 13 and raised its target price to KRW 530,000 from KRW 470,000.

“The effects of higher capacity utilization resulting from increased energy storage system (ESS) volumes began to be reflected in earnings in earnest in the third quarter of this year, and we expect the company to remain profitable in the fourth quarter even excluding the Advanced Manufacturing Production Tax Credit (AMPC),” said Hwang Seonghyeon, an analyst at Eugene Investment & Securities. “We understand that the company-wide capacity utilization rate rose to 65% in the third quarter, and we believe the resulting improvement in fundamentals is now gaining momentum.”

Assessing the third-quarter results, Hwang said they were strong even excluding compensation for the liquidation of automaker Stellantis’ Canadian joint venture (JV), which was recognized as operating income. LG Energy Solution’s third-quarter revenue was KRW 9.6 trillion and operating profit was KRW 756 billion, up 59% and 26%, respectively, from a year earlier. By business segment, ESS drove the results. Revenue surged by more than 50%, and operating profit, including North American production subsidies (AMPC), was estimated at KRW 446 billion, with an operating margin of 16%.

Hwang estimated that the cylindrical battery business achieved operating profit of KRW 201 billion, with an operating margin of 8.1%, on strong sales to Tesla. In the electric vehicle battery business, revenue rose as capacity utilization increased at the company’s plant in Poland and GM Ultium began operations in August. Hwang explained that operating profit was estimated at KRW 109 billion, with an operating margin of 2.5%, including KRW 300 billion in compensation from automakers.

Hwang said an ESS production line and a prismatic lithium iron phosphate (LFP) production line with capacity of more than 10 GWh are scheduled to be added at the company’s Lansing plant in Michigan, which opened in September. “In 2027, improving profitability by increasing utilization at existing North American production hubs and expanding ESS output, rather than making major new capacity expansions, is expected to be key,” he said.

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