LS Securities said that as LG Energy Solution's share of the electric vehicle (EV) battery market continues to fall, competition in the U.S. energy storage system (ESS) market is also expected to be tougher than anticipated.
It kept its investment rating at "hold" and lowered the target price 4.5% to 397,000 won from 416,000 won. The previous trading day's closing price of LG Energy Solution was 455,000 won.
Jeong Kyung-hee, an LS Securities analyst, said, "According to market research firm SNE Research, LG Energy Solution's share in the global EV battery market fell to 9% in January–April this year from 10% last year," and noted, "While the share of prismatic batteries in the battery market continues to expand, the share of cylindrical and pouch batteries, which LG Energy Solution mainly produces, is decreasing."
She added, "Even major non-Chinese automakers that are key customers are increasing adoption of prismatic batteries, raising the likelihood of a decline in EV battery market share going forward."
By battery type, it analyzed that the share of lithium iron phosphate (LFP) batteries continues to expand. This year, LFP batteries recorded a 59% share in 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%.
Kang said, "Starting next year, the United States plans to enforce the Foreign Entity of Concern (FEOC) regulation and raise tariffs on China-made ESS, which could be an opportunity for Korea's battery makers," but added, "U.S. companies are securing Chinese inventory before the rules take effect, and Chinese firms are preparing various response strategies, including establishing joint ventures and expanding local production."
She continued, "Even next year, Chinese companies' share of the U.S. ESS market is expected to remain above 50%–60%," and said, "Intensifying competition with non-Chinese companies such as Tesla and Panasonic is also expected."
LG Energy Solution's recent 6 GWh ESS supply contract with U.S. power company DTE Energy was viewed positively. The volume is slated for use in grid buildout projects that include Oracle AI data centers, and it was estimated to have an effect of increasing this year's revenue by about 500 billion won.
However, LS Securities maintained a "hold" rating, taking into account the possibility of a slowdown in the EV battery business and intensifying competition in the U.S. ESS market.
Kang said, "The EV institutional sector faces a risk of stalled 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 it is necessary to consider the potential for intensifying competition, including from Chinese companies."