Yuejin Investment Securities lowered its target price for LG Energy Solution on the 8th from 550,000 won to 470,000 won, a reduction of 15%, while reaffirming its Buy recommendation.
The cut reflects disappointing utilisation rates at the company's North American electric-vehicle pouch-battery plants and the initial ramp-up costs associated with new energy-storage system (ESS) factories. Yuejin also trimmed its 2026 operating-profit forecast for LG Energy Solution from 1 trillion won to 630 billion won.
The battery maker's second-quarter results came in at 7.5 trillion won in revenue and 113.3 billion won in operating profit. Although the company swung back to profit compared with the previous quarter, operating profit was down 77% year on year. Stripped of the 241 billion won benefit from the US Advanced Manufacturing Production Credit (AMPC) — a tax incentive under the Inflation Reduction Act — the underlying operating loss was 127.7 billion won, marking a third consecutive quarter in the red on that basis.
By segment, cylindrical batteries performed well, with utilisation rates exceeding 70% on higher volumes of both the 2170 and 46-series cells, generating operating profit of 167.3 billion won at a margin of 7.5%. EV pouch batteries, however, recorded an operating loss of 79.7 billion won, dragged down by a production halt at a General Motors facility. The ESS segment continued to expand its top line following the commissioning of a new factory, but profitability remained elusive given ramp-up expenses.
For the third quarter, Yuejin projects revenue of 7.9 trillion won and operating profit of 211.3 billion won. The GM plant is expected to resume production from the third quarter onwards, supporting a recovery in North American EV pouch volumes, while shipments to European customers are also forecast to grow gradually.
Yuejin highlighted several notable contract wins. LG Energy Solution secured a $4.3 billion lithium iron phosphate (LFP) battery supply agreement with Tesla, alongside a 5GWh ESS supply deal with Hanwha Q Cells and a separate 6GWh, $1.6 billion ESS contract with DTE Energy.
The company's North American ESS production capacity is set to exceed 50GWh by end-2026. Idle manufacturing capacity originally built for EV production is being repurposed for ESS output, reducing the need for fresh capital investment.
"Near-term earnings weakness persists," Yuejin wrote, "but taking into account a recovery in European EV demand, the resumption of GM plant operations, rising shipments of 46-series cells, and the full-scale ramp-up of North American ESS capacity, both earnings and the share price appear to have passed their trough."