Shinhan Investment Corp. said on the 7th that a downgrade of this year's results for LG Energy Solution is inevitable due to a decline in U.S. electric vehicle (EV) sales. However, it maintained a Buy rating, saying momentum will expand next year on growing demand for energy storage systems (ESS). It cut the target price to 510,000 won from 560,000 won. The previous trading day's closing price was 378,000 won.
Senior researcher Lee Jin-myeong at Shinhan Investment Corp. said, "A downward revision is unavoidable due to factors such as the suspension of operations at Ultium Cells (a joint venture with GM) Plants 1 and 2 in the first half," but added, "ESS momentum is expected to gradually expand on the back of high growth in North America-centered ESS demand and a stronger move away from China."
Shinhan Investment Corp. projected that LG Energy Solution's operating loss in the fourth quarter of 2025 will reach 165.3 billion won. That is larger than the market consensus of a 23.8 billion won operating loss.
Lee analyzed, "Automotive battery revenue will decline 22% due to inventory adjustments centered on North American clients, and operating profit is expected to swing to a loss of 288.8 billion won due to the roll-off of one-offs and reduced Advanced Manufacturing Production Credit (AMPC)."
By contrast, ESS revenue is expected to grow 110% year over year as the effect of new plants coming online in North America kicks in in earnest. However, due to one-off factors such as line conversions and ramp-up expenses for new facilities and a lower share of software-bundled sales, operating profit is forecast to swing to a loss.
On small batteries, Lee analyzed, "Both scale and profit grew as shipments of cylindrical EV batteries increased on the effect of new-model sales by North American EV clients." Lee estimated small-battery revenue at 2 trillion won, up 18% from a year earlier, and operating profit at 142.1 billion won, up 56%.