LG Energy Solution is forecast to turn profitable in Q2 and sustain H2 growth via ESS orders and EV battery shipments, per an analyst report. On the previous day, Shinhan Investment & Securities analyst Lee Jin-myung projected the company's Q2 revenue at 7.7362 trillion won and operating profit at 246 billion won, exceeding the market consensus of 203.4 billion won, while maintaining a 'Buy' rating but lowering the target price from 600,000 won to 550,000 won to reflect revised earnings estimates. The analyst attributed the expected turnaround to expanded US production line operations for ESS, a 38% increase in the Advanced Manufacturing Production Credit (AMPC), and recovering shipment volumes in the European EV battery market despite sluggish US demand.
Shinhan Investment Forecasts Q2 Profit Turnaround for LG Energy Solution
Shinhan Investment & Securities projected LG Energy Solution's Q2 revenue at 7.7362 trillion won, an 18.0% increase from the previous quarter, with operating profit of 246 billion won marking a return to profitability and surpassing the market consensus of 203.4 billion won. The medium-to-large battery segment is expected to generate revenue of 5.537 trillion won, up 21% quarter-on-quarter, with operating profit of 96.5 billion won representing a turnaround to profitability. EV battery revenue is forecast at 3.118 trillion won, an 8% increase, supported by recovering European market shipment volumes and compensation recognition despite weakness in the US EV market, with profitability also expected to improve.
The ESS segment is projected to post revenue of 2.419 trillion won, a 43% quarter-on-quarter increase, driven by expanded operations of new US production lines and alleviation of bottlenecks. The analyst noted that despite fixed cost burdens, the 38% expansion of the AMPC will lead the segment to profitability. The small battery division is expected to achieve revenue of 2.2 trillion won, up 11%, and operating profit of 149.5 billion won, up 17%, benefiting from strong Tesla sales in Europe and Asia.
ESS and EV Battery Segments Drive H2 Revenue Growth Outlook
The analyst stated that H2 will see full-scale growth in ESS orders and earnings, with continued large-scale contracts including a 6GWh deal related to DTE Energy. H2 ESS revenue is expected to increase 46% compared to H1. Lee Jin-myung explained that profitability may remain somewhat weak through Q2 due to line conversion costs, but a full-scale turnaround is anticipated from rising utilization rates and expanded production tax credits.
The EV battery segment is also expected to show quarterly earnings improvement despite concerns over low utilization at US plants, driven by increased shipments of mid-nickel and LFP (lithium iron phosphate) batteries in Europe and strong shipments of Tesla cylindrical batteries.
Analyst Cites Profitability Proof Requirements for Stock Rebound
The analyst stated that additional proof is needed for a full-scale stock price rebound and revaluation, noting that normalization of ESS profitability and confirmation of reduced losses in the automotive battery division must be verified.
FAQ
What did Shinhan Investment forecast for LG Energy Solution's Q2 operating profit?
Shinhan Investment & Securities forecast LG Energy Solution's Q2 operating profit at 246 billion won, exceeding the market consensus of 203.4 billion won and marking a turnaround to profitability from the previous quarter.
Why is LG Energy Solution's ESS segment expected to grow in H2?
The ESS segment is expected to grow in H2 due to continued large-scale orders including a 6GWh contract related to DTE Energy, expanded US production line operations, and a 38% increase in the Advanced Manufacturing Production Credit (AMPC), with H2 revenue projected to rise 46% compared to H1.
