[Click eStock] "LG EnSol, 4Q Operating Profit Expected to Fall Short"

Concerns Over Employee Stock Ownership Already Reflected in Stock Price

[Asia Economy Reporter Hwang Yoon-joo] Shin Young Securities on the 4th forecasted that LG Energy Solution's operating profit for the 4th quarter will fall short of market expectations. The investment opinion 'Buy' and the target price of 690,000 KRW were maintained.

Researcher Park Jin-soo of Shin Young Securities stated, "The 4th quarter sales are expected to increase by 6% from the previous quarter to 8.1 trillion KRW, while operating profit is expected to decrease by 29% to 368 billion KRW." This level of operating profit is below the market consensus of 480 billion KRW.

Researcher Park explained, "The lowered KRW-USD exchange rate since November negatively affected profitability," adding, "The reduction in the spread between selling price and raw material costs due to employee incentives and the use of expensive raw materials is the main reason for the profit decline compared to the previous quarter."

For the 4th quarter, sales of medium and large batteries are expected to increase by 10% from the previous quarter to 5.4 trillion KRW, supported by the recovery of electric vehicle sales in Europe and the expansion of ESS projects in North America. Despite steady shipments of cylindrical batteries for EVs, sales of small batteries for IT devices are expected to remain similar to the 3rd quarter at 2.7 trillion KRW due to a decline in average selling price (ASP) and reduced volume.

Researcher Park projected 2023 sales to increase by 44% year-on-year to 36.4 trillion KRW. During the same period, the operating profit margin in the EV segment is expected to expand by 3 percentage points to 5.7%.

He anticipated, "With the full-scale operation of Ultium Cells Plant 1 (quarterly ramp-up to 10GWh) and the start of Plant 2 operations in the second half (beginning 10GWh scale operation), shipments to North America will grow," and "The small battery segment will maintain stable double-digit profitability."

Researcher Park added, "Concerns over the recent slowdown in demand from major customer Tesla in China, rumors of production cuts at the Shanghai plant, and the unlocking of employee stock ownership at the end of January (3.4% of circulating shares) have caused a 33% stock price decline since December," but he judged that "most of these concerns have already been reflected in the stock price."

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