LG Energy Solution posted operating profit of 113bn won (approximately $82m) in the second quarter of 2026 (April–June), falling 75bn won short of the market consensus. The figures come from a company research report published on 31st July by IBK Investment & Securities.
Revenue for the quarter reached 7.56trn won, up 15.3% from the previous quarter. The company swung back to profit after recording an operating loss of 208bn won in the first quarter, though the headline figure includes 241bn won in AMPC (Advanced Manufacturing Production Credits), the subsidy available under America's Inflation Reduction Act (IRA) to battery manufacturers with domestic production. The operating margin of 1.5% represented a 4.7 percentage-point improvement quarter-on-quarter.
Against the consensus (revenue of 7.22trn won, operating profit of 188bn won), revenue beat by 4.7%, but operating profit fell short by 39.8%. IBK Investment & Securities identified sluggish energy storage system (ESS) sales as the primary culprit. Management had guided for ESS revenue growth of 40% quarter-on-quarter; the actual increase came in at 31.6%.
The shortfall stemmed from a structural imbalance in the production process. Cell manufacturing itself ran smoothly, but the downstream capacity for assembling cells into battery packs and shipping containers proved to be a bottleneck. Even with an adequate supply of cells, constrained finishing-line capacity limits how much product can ultimately be shipped — a vulnerability that materialised this quarter.
The electric vehicle (EV) segment, by contrast, held its own. Sales of mid- and lower-priced EVs in Europe, led by Volkswagen and Renault, expanded, and shipments of small-format batteries to Apple and Samsung performed well, helping overall revenue meet expectations.
Viewed against the trajectory of 2024 and 2025, the recovery is real but slow. Annual operating profit was 575bn won in 2024 and 1.346trn won in 2025, yet IBK's full-year estimate for 2026 stands at just 1.069trn won — a 20.6% decline year-on-year. Strip out the AMPC credits, and the underlying operating margin remains negative at -1.3%, suggesting the core business has yet to regain competitive footing.
The outlook for the third quarter is more encouraging. IBK Investment & Securities forecasts revenue of 9.047trn won (up 19.7% quarter-on-quarter) and operating profit of 293bn won (up 160.0%), with 386bn won of AMPC baked in. ESS sales are expected to lead the way, growing 42% quarter-on-quarter.
The ESS growth story hinges on expanded manufacturing capacity. From the second quarter, new plants in Lansing, Michigan (10GWh) and Arizona UC2 (10GWh) have begun mass production, lifting LG Energy Solution's total global ESS capacity to 68GWh — 57GWh in the United States, 7GWh in China, 3GWh in Poland, and 1GWh in South Korea. The combined 20GWh from Lansing and UC2 is set to ramp up in earnest during the second half of the year.
Order momentum in the second half also warrants attention. The company's annual ESS order target is 90GWh, but cumulative first-half bookings reached only around 20GWh, leaving 70GWh to be secured in the back half of the year. IBK's report title — "90-20=70" — captures this arithmetic neatly: whether management can close that gap will largely determine full-year performance.
On the EV side, the Ultium Cells joint venture with General Motors is scheduled to begin operations in August. IBK expects EV-related AMPC receipts to accelerate sharply from the third quarter onwards. Credits from the EV segment totalled just 4bn won in the first quarter and 5bn won in the second; the bank projects a jump to 39bn won in the third quarter and 102bn won in the fourth.
The optimistic outlook is not without risks. Should the pack-and-container bottleneck exposed in the second quarter persist into the third, the ESS targets could once again prove elusive. Any policy changes to the IRA in the United States would put AMPC income at risk. And despite the shares trading at 320,000 won as of 30th July — a 43% discount to the bank's 560,000 won target price — investors must also weigh a valuation of 129 times 2026 estimated earnings at a time when annual profit is projected to decline year-on-year.
IBK Investment & Securities maintained its buy recommendation and 560,000 won target price, judging that the company's own guidance — revenue growth of 15–20% year-on-year and a mid-single-digit operating margin for 2026 — remains achievable within the year.