Corporate Logo(source: lgensol.com)
Hana Securities upgraded its investment rating on LG Energy Solution (373220) from ‘Neutral’ to ‘Buy’ on July 28, citing the company’s first upward earnings estimate revision cycle in two years. The brokerage also raised its target price from 336,000 won to 450,000 won.
For the second quarter, LG Energy Solution reported an operating profit of 492.2 billion won, a 152% increase year-on-year. However, revenue declined by 10% over the same period to 5.6 trillion won. Excluding the impact of the U.S. Advanced Manufacturing Production Credit (AMPC), the company recorded a break-even operating margin of 0.0%, marking a return to profitability after six consecutive loss-making quarters.
Looking ahead to the third quarter, Hana Securities expects the decline in both revenue and profit to come to a halt. The consolidated operating margin, including AMPC benefits, is projected to improve by 0.8 percentage points quarter-on-quarter to 9.6%. Despite reduced AMPC contributions stemming from weakened electric vehicle (EV) demand in North America, increased energy storage system (ESS) sales and improved utilization at Hyundai Motor's Asian production lines are expected to support earnings. Excluding AMPC, the operating margin is forecast to reach 2.5%, reinforcing the company’s return to stable profitability.
The brokerage noted that the launch of ESS production in the U.S. marks a critical inflection point for LG Energy Solution's earnings trajectory. With the U.S. set to impose tariffs on Chinese ESS batteries starting next year, local plants with a planned capacity of 17GWh in 2026 and 30GWh in 2027 are expected to come online.
Crucially, the company owns 100% of these standalone ESS facilities. Unlike EV battery joint ventures, this structure allows LG Energy Solution to fully capture the 35 dollars per kWh subsidy without sharing it with customers. This setup will not only bolster consolidated operating profit but also significantly increase net income attributable to controlling shareholders.
Annual ESS shipments of 20GWh are expected to contribute at least 1.1 trillion won to controlling shareholders' net income. Reflecting this, Hana Securities revised its 2027 net income forecast upward by 54%. The firm emphasized that this marks the first upward revision in earnings per share (EPS) in two years, which could have a substantial positive impact on the stock.
Hyun-Soo Kim, an analyst at Hana Securities, stated, “Following the expiration of AMPC subsidies in 2032, the company should be able to achieve a sustainable net profit margin of 7%, assuming full utilization of its existing lines without additional capacity expansion. This limits downside risk for the stock.”
He added, “During the previous earnings downgrade cycle, it was appropriate to trade around a 80 trillion won market capitalization. However, given this shift to an upward earnings revision phase after two years, we recommend increasing exposure to the stock.”
*[KOSPI] LG Energy Solution(373220) was established through a spin-off from LG Chem, and it develops, manufactures, and sells battery products used in electric vehicles(EVs), energy storage systems(ESS), and more. Market capitalization is 85.059 trillion won (as of July 25, 2025, closing price).
Corporate Logo(source: lgensol.com)
Hana Securities upgraded its investment rating on LG Energy Solution (373220) from ‘Neutral’ to ‘Buy’ on July 28, citing the company’s first upward earnings estimate revision cycle in two years. The brokerage also raised its target price from 336,000 won to 450,000 won.
For the second quarter, LG Energy Solution reported an operating profit of 492.2 billion won, a 152% increase year-on-year. However, revenue declined by 10% over the same period to 5.6 trillion won. Excluding the impact of the U.S. Advanced Manufacturing Production Credit (AMPC), the company recorded a break-even operating margin of 0.0%, marking a return to profitability after six consecutive loss-making quarters.
Looking ahead to the third quarter, Hana Securities expects the decline in both revenue and profit to come to a halt. The consolidated operating margin, including AMPC benefits, is projected to improve by 0.8 percentage points quarter-on-quarter to 9.6%. Despite reduced AMPC contributions stemming from weakened electric vehicle (EV) demand in North America, increased energy storage system (ESS) sales and improved utilization at Hyundai Motor's Asian production lines are expected to support earnings. Excluding AMPC, the operating margin is forecast to reach 2.5%, reinforcing the company’s return to stable profitability.
The brokerage noted that the launch of ESS production in the U.S. marks a critical inflection point for LG Energy Solution's earnings trajectory. With the U.S. set to impose tariffs on Chinese ESS batteries starting next year, local plants with a planned capacity of 17GWh in 2026 and 30GWh in 2027 are expected to come online.
Crucially, the company owns 100% of these standalone ESS facilities. Unlike EV battery joint ventures, this structure allows LG Energy Solution to fully capture the 35 dollars per kWh subsidy without sharing it with customers. This setup will not only bolster consolidated operating profit but also significantly increase net income attributable to controlling shareholders.
Annual ESS shipments of 20GWh are expected to contribute at least 1.1 trillion won to controlling shareholders' net income. Reflecting this, Hana Securities revised its 2027 net income forecast upward by 54%. The firm emphasized that this marks the first upward revision in earnings per share (EPS) in two years, which could have a substantial positive impact on the stock.
Hyun-Soo Kim, an analyst at Hana Securities, stated, “Following the expiration of AMPC subsidies in 2032, the company should be able to achieve a sustainable net profit margin of 7%, assuming full utilization of its existing lines without additional capacity expansion. This limits downside risk for the stock.”
He added, “During the previous earnings downgrade cycle, it was appropriate to trade around a 80 trillion won market capitalization. However, given this shift to an upward earnings revision phase after two years, we recommend increasing exposure to the stock.”
*[KOSPI] LG Energy Solution(373220) was established through a spin-off from LG Chem, and it develops, manufactures, and sells battery products used in electric vehicles(EVs), energy storage systems(ESS), and more. Market capitalization is 85.059 trillion won (as of July 25, 2025, closing price).