[Click eStock] "LG EnSol, North America Momentum Expectations... Focus on IRA Details"

Shinhan Investment Corp. Report

Shinhan Investment Corp. forecasted that LG Energy Solution will benefit from the production amount credit (AMPC) under the U.S. Inflation Reduction Act (IRA) policy. The investment rating was set to 'Buy,' and the target price was raised from 620,000 KRW to 700,000 KRW.

On the 30th, researcher Jeong Yong-jin of Shinhan Investment Corp. stated, "The detailed provisions of the IRA policy, which will reshape the landscape of the North American secondary battery industry, will be disclosed this week," and analyzed, "The policy momentum of the U.S., which has the financial capacity to implement it, is a key point to check in the IRA details."

Researcher Jeong explained, "As the secondary battery cell value chain begins local expansion in the U.S., investment costs have increased by 1.5 to 1.7 times," and added, "In the company's Arizona investment announced last week, unit facility investment (Capex) rose to between 1.6 trillion and 1.9 trillion KRW per 10GWh."

He continued, "According to Shinhan Investment Corp.'s estimates, LG Energy Solution aims to build 250GWh of capacity for the U.S. market by 2025?2026," and said, "It is expected to expand to 300?350GWh in the future."

He added, "This scale would be difficult to achieve without full government support," and predicted, "The secondary battery localization policy through AMPC support is highly likely to be realized."

Researcher Jeong also noted, "Excluding policy momentum, the core strength of secondary battery cell companies is also showing improvement," and said, "In the first half of this year, when shipment momentum is weak, the exchange rate effect due to the weak Korean won is supporting performance, and in the second half, shipment improvement is expected to continue due to new car launches by major customers." He further forecasted, "First-quarter results this year are expected to be 7.9 trillion KRW in sales and 524.3 billion KRW in operating profit," adding, "This exceeds the consensus (market forecast) by 12%."

He also added, "Last year, LG Energy Solution's investment concept was a sold-out stock," and said, "This year, it is undergoing a color change as a North American Capex leader."