[Click eStock] "LG Energy Solution Improved Profitability in 1Q... Medium and Large Batteries Are Key"

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[Asia Economy Reporter Myunghwan Lee] Hana Financial Investment announced on the 28th that it maintains a buy rating and a target price of 505,000 KRW for LG Energy Solution, citing improved profitability in the first quarter compared to the previous quarter.

The company analyzed that LG Energy Solution posted stable profits in the first quarter. LG Energy Solution's first-quarter sales this year increased by 2% year-on-year to 4.3 trillion KRW, and operating profit was 258.9 billion KRW, down 24% from the same period last year but higher than market expectations.

By segment, the small battery division, which accounts for 40% of sales, saw an 82% increase in sales compared to the same period last year due to a surge in shipments of cylindrical batteries for Tesla. Hana Financial Investment analyzed that the profitability remained high as price pass-through for metal price increases was implemented. The automotive battery division saw a 17% decrease in sales compared to last year as recall production for GM and Hyundai, which started last year, continued into the first quarter, and customers experienced production disruptions due to semiconductor supply shortages. ESS battery sales decreased by 49% year-on-year. Operating profit by segment was estimated at 217.4 billion KRW for small batteries, 40.7 billion KRW for large-sized electric vehicle batteries, and -6.1 billion KRW for large-sized ESS batteries.

LG Energy Solution's second-quarter sales this year are forecasted to decrease by 8% year-on-year to 4.7 trillion KRW, and operating profit is expected to decline by 68% year-on-year to 232.1 billion KRW, showing a slight decrease compared to the previous quarter. The resumption of operations at Tesla's Shanghai plant is expected to sustain growth in the cylindrical battery segment. However, for large-sized batteries, ongoing production disruptions at European OEM customers due to geopolitical risks and the impact of rising metal prices are expected to slightly worsen segment profitability compared to the first quarter. The 68% decrease in operating profit in the second quarter is attributed to the receipt of settlement money from SK Innovation in the second quarter of last year; excluding this, the profit increase compared to the same period last year is expected to be around 500 billion KRW.

Hyunsoo Kim, a researcher at Hana Financial Investment, said, "Most of the large-sized battery recall volumes are expected to be exhausted in the second half of the year," adding, "With the gradual easing of semiconductor supply shortages, increased sales and improved profitability of large-sized batteries will enable upward revisions of earnings estimates, potentially leading to a stock price rebound."

This content was produced with the assistance of AI translation services.