LS Securities said competition in the U.S. energy storage system (ESS) market is likely to be fiercer than expected, as LG Energy Solution continues to lose share in the electric vehicle (EV) battery market.
It kept a "hold" investment opinion and cut the target price 4.5% to 397,000 won from 416,000 won. LG Energy Solution's closing price on the previous trading day was 455,000 won.
Jeong Kyung-hee, an analyst at LS Securities, said, "According to market research firm SNE Research, LG Energy Solution's share in the global EV battery market from January to April this year fell to 9% from 10% a year earlier," and noted, "While prismatic batteries are gaining share in the battery market, the shares of cylindrical and pouch batteries, which LG Energy Solution mainly produces, are declining."
Jeong added, "Even major non-Chinese automakers, which are key clients, are increasing adoption of prismatic batteries, raising the likelihood of a future decline in EV battery market share."
By battery type, it analyzed that the share of lithium iron phosphate (LFP) batteries continues to expand. This year, LFP batteries accounted for 59% of the global battery market.
LS Securities assessed the U.S. ESS market as a new growth opportunity but projected that the intensity of competition will be higher than expected.
Chinese companies currently hold more than 90% of the global ESS market. The market shares of LG Energy Solution and Samsung SDI are each around 2%.
Jeong said, "Starting next year, the United States plans to impose foreign entity of concern (FEOC) restrictions and raise tariffs on Chinese ESS, which could be an opportunity for Korean battery makers," but added, "U.S. companies are securing Chinese inventory ahead of the rules taking effect, and Chinese firms are preparing various response strategies, including establishing joint ventures and expanding local production."
Jeong continued, "Even next year, Chinese companies' share of the U.S. ESS market is expected to remain above 50% to 60%," and said, "Competition with non-Chinese players such as Tesla and Panasonic is also expected to intensify."
It viewed positively LG Energy Solution's recent 6 GWh ESS supply contract with U.S. utility DTE Energy. The volume is slated for a grid buildout that includes Oracle AI data centers, and it estimated an increase in revenue of about 500 billion won this year.
However, LS Securities maintained a "hold" investment opinion in light of potential slowing growth in the EV battery business and intensifying competition in the U.S. ESS market.
Jeong said, "The EV institutional sector faces the risk of stagnant growth due to changes in battery formats and declining market share in Europe," and added, "Entry into the U.S. ESS market is positive, but the potential for intensifying competition, including from Chinese companies, should be taken into account."