Daishin Securities “LG Ensol, ESS performance next year in earnest… target stock price lowered”

(Seoul = Yonhap News) Reporter Kang Su-ji = Daishin Securities predicted on the 4th that LG Energy Solution [373220] will see full-fledged performance improvement next year despite a short-term slump in the energy storage system (ESS) business.

Kim Gwi-yeon, a researcher at Daishin Securities, said, “It is unfortunate that the ESS division continues to be in deficit and its order performance is poor, but the improvement is valid.” The ESS division's deficit is based on operating profit excluding the U.S. Advanced Manufacturing Production Tax Credit (AMPC).

However, Daishin Securities lowered its target stock price, citing lowered forecasts for LG Energy Solution's North American battery shipments and small battery profitability next year. The target stock price was lowered from 530,000 won to 500,000 won, which means an upside of about 48% compared to the previous day's closing price of 338,000 won.

Researcher Kim said that although it is unfortunate that ESS orders and the turnaround to surplus are slower than expected, he predicted that the tight supply compared to the demand for ESS projects in North America will continue next year.

He predicted that based on the North American ESS order backlog of 160GWh (gigawatt hour) as of the end of the third quarter of this year, shipments will begin in earnest next year, and the burden of initial operation costs for new production lines will also be reduced. Accordingly, it is expected that the ESS division will return to profit next year.

Sales in the fourth quarter of this year were estimated at KRW 10.8 trillion, up 12% from the previous quarter, and operating profit was estimated at KRW 490.6 billion, down 35%. Although the one-time effect of electric vehicle customer volume compensation reflected in the third quarter is disappearing, profit strength is expected to improve due to expansion of ESS shipments in North America.