[Click eStock] "LG Energy Solution, High Expectations for 4Q Earnings Are a Burden"

Kiwoom Securities mentioned on the 10th that LG Energy Solution's third-quarter earnings exceeded consensus, but the high expectations for fourth-quarter performance pose a burden.

LG Energy Solution's preliminary third-quarter results showed sales of 6.9 trillion KRW and operating profit of 448.3 billion KRW, surpassing market consensus. The reason for exceeding the consensus is estimated to be due to strong North American sales volume, better-than-expected ESS sales, and some compensation effects. For medium-to-large batteries, the operating rate of the Poland plant improved compared to the previous quarter due to inventory accumulation demand centered on Volkswagen. In the ESS sector, sales recognition from the Hanwha Q CELLS power grid project slightly exceeded the initial guidance, resulting in improved profitability compared to the previous quarter. On the other hand, small batteries are estimated to have seen about a 10% decrease in sales volume compared to the previous quarter due to inventory adjustments caused by customer model changes.

Regarding North American shipments, they increased compared to the previous quarter, and the AMPC scale also grew quarter-on-quarter. In the first quarter, GM appeared to focus on depleting Ultium battery inventory, but in the third quarter, ahead of year-end new car launches, production increased with the ramp-up of the Ultium 2 plant, slightly expanding the AMPC scale compared to the previous quarter. GM's recently announced third-quarter pure electric vehicle deliveries increased to 32,095 units, showing an upward trend, but still fell short of GM's annual production guidance. Meanwhile, considering the increased inventory burden and customer electric vehicle sales volume, the fourth-quarter AMPC scale is expected to decrease compared to the previous quarter. This year's AMPC performance is expected to be around 30.6 GWh, the lower end of LG Energy Solution's initial guidance for the year.

Junsoo Kwon, a researcher at Kiwoom Securities, said, "We maintain LG Energy Solution as a top pick, but the high expectations for short-term performance are a burden."