[Click eStock] "LG Ensol Still Uncertain... Confirm Demand First"

Slower-Than-Expected European Market Demand
Recovery of Domestic Battery Companies Expected to Be Delayed

There is an analysis that LG Energy Solution's performance is still in a stage of ongoing uncertainty, so the battery demand from upstream companies must be confirmed first.

On the 1st, IBK Investment & Securities maintained its 'Buy' rating and target price of 500,000 KRW for LG Energy Solution based on this background. The closing price the previous day was 334,500 KRW.

LG Energy Solution's first-quarter earnings this year are estimated at 5.906 trillion KRW in sales and 101 billion KRW in operating profit. Compared to the same period last year, sales decreased by 3.7% and operating profit by 35.8%. It is expected to slightly exceed market consensus. However, this is estimated to be due to the high won-dollar exchange rate. The assumed won-dollar exchange rate for Q1 was around 1,400 KRW, but the actual average exchange rate in Q1 was 1,453 KRW.

In the mid-to-large electric vehicle (EV) segment, it is projected at about 3.726 trillion KRW due to inventory adjustments by U.S. General Motors (GM) and increased battery shipments to Europe. This is an 8.3% increase compared to the same period last year but a 6.4% decrease from the previous quarter. Small batteries are expected to see a significant increase in shipments due to the launch of Tesla's Model Y facelift (FL) vehicle, a key customer.

Nevertheless, concerns remain that uncertainty continues. Originally, the European market this year was expected to see strong growth in the EV market as it was the first year in five years for the enforcement of stricter carbon emission regulations. In fact, pure electric vehicle (BEV) sales increased by 31.4% through February this year, raising expectations for increased battery demand. However, LG Energy Solution's battery usage for Europe decreased by 12.9% during the same period. European EV demand may slow down more than initially expected, and the recovery of upstream demand for domestic battery companies is highly likely to be delayed. Moreover, GM's mainstream EV models, Equinox and Blazer, are produced in Mexico, and the U.S. government's announcement of tariff imposition is expected to increase uncertainty.

Lee Hyun-wook, a researcher at IBK Investment & Securities, explained, "Most domestic secondary battery-related companies expected the market to be weak in the first half and strong in the second half last year, but in reality, performance slumped due to delayed demand recovery. To avoid repeating the same mistake, it is necessary to first confirm the recovery of upstream industrial demand for LG Energy Solution."