[Click eStock] "LG Energy Solution, Possibility of Adjusting Earnings Outlook for Second Half"

Maintain Investment Opinion and Target Price

LG Energy Solution Headquarters, Yeoui-daero, Yeongdeungpo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Hi Investment & Securities maintained a buy rating and a target price of 500,000 KRW on LG Energy Solution on the 24th, stating that "while the valuation burden (stock price level relative to corporate value) is relatively low within the domestic secondary battery industry, the attractiveness may decrease if there is an adjustment in earnings forecasts due to changes in the external environment." The closing price on the previous trading day was 333,000 KRW.

On the same day, Jeong Won-seok, a researcher at Hi Investment & Securities, said, "There is uncertainty such as the possibility of a downward revision of the annual electric vehicle production plan by General Motors (GM), a major North American client, and the results of the U.S. presidential election scheduled for November," advising, "Approach with increased weighting from a short-term trading perspective, but risk management is also necessary."

He added, "The electric vehicle market will inevitably grow. Given LG Energy Solution's high technological capability and diverse customer base, earnings are expected to show a mid- to long-term upward trend centered on the North American market," but also pointed out, "Recently, LG Energy Solution's stock price has fallen to a price-earnings ratio (PER) of 16.6 times and a price-to-book ratio (PBR) of 2.6 times based on Hi Investment & Securities' 2026 earnings forecast, as concerns over weak first-half performance due to slowing electric vehicle demand in North America and Europe have been priced in."

This year's second-quarter earnings are expected to show sales of 6.5 trillion KRW and operating profit of 176 billion KRW, down 26% and 62%, respectively, compared to the same period last year. These forecasts fall short of market expectations (sales of 6.7 trillion KRW and operating profit of 283 billion KRW).

North American demand is positive. Researcher Jeong said, "GM launched the Equinox EV, a popular compact SUV model, and began full-scale sales last month, gradually expanding battery cell demand," adding, "As various new electric vehicles are scheduled to be released, LG Energy Solution, the main battery supplier, presented the expected scale of the Advanced Manufacturing Production Credit (AMPC) subsidy for the year based on GM's production volume of 200,000 units from the beginning of the year."

However, he noted, "Realistically, the likelihood of achieving the target seems low. If GM's electric vehicle production plan is revised downward in the second half, the AMPC subsidy, which is expected to account for about 90% of this year's operating profit, will be significantly reduced, making it inevitable to adjust expectations for second-half earnings."

Demand slowdown for European original equipment manufacturers (OEMs) and Tesla was also evident. Considering the lagging effect due to the decline in raw material prices, operating profit for medium- and large-sized batteries excluding AMPC is expected to see an expanded deficit.

Researcher Jeong forecasted, "Due to the slowdown in European electric vehicle demand, the production rate at the Poland plant has significantly dropped because of poor sales from European OEMs, leading to continued fixed cost burdens," adding, "Tesla, a cylindrical battery customer, has also seen a significant slowdown in growth as market competition intensifies with the rise of Chinese electric vehicles offering lower prices."