[Click eStock] "LG Energy Solution, 'Earnings Shock'... Target Price Maintained at 531,000"

Yuanta Securities maintained a target price of 531,000 KRW and a buy rating on LG Energy Solution on the 8th, stating that the company recorded an earnings shock in the first quarter.

LG Energy Solution posted first-quarter sales of 6.1 trillion KRW and an operating profit of 157.3 billion KRW, significantly missing consensus estimates.

Excluding a tax credit of 188.9 billion KRW, the operating profit was a loss of 31.6 billion KRW. Looking at each business segment, small batteries recorded approximately 15% top-line growth compared to the fourth quarter due to increased restocking demand from major customers, despite a sharp decline in the ASP (average selling price) of cylindrical batteries. However, demand for IT pouch batteries slowed, resulting in an estimated operating margin of about 1%. Automotive batteries saw sales decline by about 25% compared to the fourth quarter due to continued low utilization rates at the Poland plant and decreased demand in North America. The operating margin was estimated to be around 0.3%. ESS (energy storage systems) also recorded losses due to a significant drop in shipments.

In the second quarter, demand growth is expected more in automotive batteries than in small batteries. While small battery ASPs sharply declined in the first quarter leading to increased restocking demand, demand growth is anticipated in the second quarter as ASPs in the EV (electric vehicle) segment are expected to fall. However, through the first half of the year, the decline in ASPs, demand slowdown, and high fixed costs are expected to limit the scale of revenue and profit growth. In the second half, restocking demand across all business segments is expected to expand based on the lowered ASPs. Additionally, demand expansion is anticipated due to the launch of Juniper, the facelift version of the European Tesla Model Y, the start of mass production of the 46 series, and related order momentum.

Researcher Ianna from Yuanta Securities said, "There is high uncertainty regarding demand in the European and U.S. markets in 2024," adding, "We expect not only a performance rebound in the second half but also order momentum related to 4680 batteries."

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