LG Energy Solution disclosed preliminary third-quarter results on 8th October, reporting revenues of 9.6434 trillion won and operating profit of 756 billion won — up 59.0% and 25.7% respectively from a year earlier.
On the same day, Shinhan Investment Securities published a research note reiterating a "Buy" rating and a target price of 500,000 won on the stock. Based on the closing price of 391,000 won on 7th October, that implies upside of 27.9%.
The preliminary figures substantially exceeded Shinhan's own prior estimates of 9.0424 trillion won in revenue and 327.5 billion won in operating profit. Against the broader market consensus of 321.7 billion won in operating profit, the actual figure of 756 billion won was more than double. The outperformance was driven primarily by a faster-than-expected expansion in the energy-storage system (ESS) business, which underpinned a significant improvement in margins.
Shinhan identified ESS and cylindrical batteries as the twin engines of the earnings beat. ESS revenues are estimated to have risen 38% quarter-on-quarter to roughly 3 trillion won, helped by the easing of bottlenecks in battery-pack and link assembly. In the small-cell segment — predominantly cylindrical batteries used in consumer electronics and electric vehicles — revenues are estimated at 2.4 trillion won, up 4% on the quarter, with operating profit rising 18% to 193.1 billion won. Stronger Tesla vehicle sales in Europe and China boosted cylindrical-cell shipments, lifting the segment's operating margin to an estimated 7.9%.
The medium-and-large-cell division, which supplies batteries for electric vehicles and is the company's largest segment by scale, saw revenues grow 19% quarter-on-quarter, aided by the restart of a joint venture with General Motors and a partial recovery in European EV demand. However, Shinhan cautioned that the division remains loss-making once receipts from the US Advanced Manufacturing Production Credit (AMPC) — a federal subsidy for domestically produced battery cells — are stripped out. Estimated AMPC receipts rose 46% quarter-on-quarter to 318.3 billion won.
On the order pipeline, Shinhan expects LG Energy Solution to secure roughly 30 gigawatt-hours (GWh) of new orders in the first half of this year against a full-year target of 90 GWh, with the remainder weighted towards the second half. North American production capacity is forecast to exceed 50 GWh by year-end, and the division is expected to turn profitable on an ex-AMPC basis from the fourth quarter onwards.
For longer-term growth, Shinhan pointed to expanded ESS capacity in North America and the ramping up of mass production of the 46-series cylindrical cell — a larger-format cell favoured by Tesla and other premium EV makers. The convergence of North American ESS expansion, a normalisation of profitability, and large-scale 46-series output in 2027 is projected to lift operating profit to 4.0923 trillion won, rising further to 6.3258 trillion won in 2028.
The annual earnings trajectory is uneven. Operating profit is expected to rebound from 575.4 billion won in 2024 to 1.3461 trillion won in 2025, before retreating to 895.2 billion won in 2026 as persistent losses in medium-and-large-cell batteries weigh on overall results. The stronger-than-expected third-quarter numbers, however, leave room for upward revisions to full-year forecasts.
On valuation, Shinhan applied a multiple of 15 times its 2027 EBITDA estimate of 9.2556 trillion won, then adjusted for asset values and net debt, to arrive at a target market capitalisation of 114.4040 trillion won and a target price of 500,000 won per share. This represents a 30% premium to the average valuation of global battery-cell manufacturers.
Investors should nonetheless be alert to a number of risks. The company's heavy dependence on AMPC subsidies leaves earnings vulnerable to any policy change, while the medium-and-large-cell business cannot yet stand on its own without government support. The debt-to-equity ratio is expected to climb sharply to 169.5% in 2026 from 129.0% in 2025, with net debt forecast to exceed 24 trillion won. An interest coverage ratio of just 0.7 times raises questions about near-term financial resilience.
Shinhan concluded that a meaningful re-rating of the stock would require tangible evidence of additional ESS order wins and a demonstrated improvement in underlying profitability as assembly bottlenecks ease. The company is expected to post a net loss attributable to controlling shareholders of 717.3 billion won in 2026, with a return to profit — projected at 2.0604 trillion won — not anticipated until 2027.