Hanwha Investment & Securities on the 30th said the market has found a bottom for LG Energy Solution and there are expectations for an earnings rebound starting in the second half of this year. It maintained a target price of 500,000 won and a "buy" rating. The previous trading day's closing price of LG Energy Solution was 416,500 won.
In the fourth quarter of last year, LG Energy Solution's automotive battery division is estimated to have posted an operating loss of 490.7 billion won excluding the Advanced Manufacturing Production Credit (AMPC), the energy storage system (ESS) business an operating loss of 105.6 billion won, small batteries an operating profit of 141.5 billion won, and AMPC an operating profit of 332.8 billion won.
Hanwha Investment & Securities forecast that in the first quarter of this year LG Energy Solution would post sales of 5.8 trillion won and an operating loss of 160.4 billion won. Analyst Lee Yong-wook of Hanwha Investment & Securities said, "The automotive battery division will see North American sales volumes fall to near zero due to the aftermath of GM's production halt, with shipments down 26% from the previous quarter, and large operating losses will continue as a result."
This year's annual shipments are expected to rise only 2% from last year. Due to negative growth in U.S. electric vehicle (EV) sales, automotive battery shipments will fall 27%, which could cap overall growth.
The analyst explained, "However, from the second quarter of this year, a full-fledged recovery will emerge, led by ESS and the 46 series," adding, "With a decline in North American EV battery shipments and the impact of AMPC sharing in the ESS division, the annual AMPC amount will shrink and companywide operating profit could also decline."
However, once headwinds such as weak U.S. EV demand and ESS sharing are reflected in earnings estimates, further downside factors are limited.
The analyst said, "A V-shaped rebound in the short term is difficult to expect, but the company has raised its year-end North American ESS capacity (CAPA) plan to 50 GWh," adding, "Mass production of the 46 series could begin at the Arizona plant as early as the fourth quarter of this year."