[Click eStock] "LG EnSol 4Q Operating Profit Below Expectations... Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Shinhan Investment Corp. predicted on the 6th that LG Energy Solution's operating profit in the fourth quarter will fall short of expectations due to a one-time issue. Accordingly, it maintained a 'Buy' investment rating and lowered the target price to 620,000 KRW.

Researcher Jeong Yong-shin of Shinhan Investment Corp. stated, "We forecast fourth-quarter sales to increase by 84% year-on-year to 8.2 trillion KRW, while operating profit is expected to decrease by 42% to 300.3 billion KRW," adding, "Operating profit is expected to fall short of expectations by 36%."

Researcher Jeong explained, "It is estimated that one-time costs of about 200 billion KRW occurred due to incentive-based labor costs following strong performance in 2022 and inventory adjustment effects."

Sales growth was possible thanks to price negotiations and volume increases conducted in the third quarter. The global battery electric vehicle (BEV) market, excluding China, recorded 530,000 units in October and November, a 37% increase compared to the previous year.

The U.S. market outlook is positive. The U.S. BEV market is expected to increase significantly from 800,000 units in 2022 to 1.4 million units in 2023. GM, which was outside the top 10 in global electric vehicle sales, is expected to expand electric vehicle sales this year based in the U.S. LG Energy Solution plans to operate the Ultium Cells Plant 2 (Tennessee) in 2023, following the Ultium Cells Plant 1 (Ohio) at the end of 2022.

Researcher Jeong forecasted, "In 2023, many U.S. customers will benefit from the Inflation Reduction Act (IRA) subsidies due to local production," adding, "Along with deferred demand from 2022, the U.S. electric vehicle market is expected to begin significant growth."