Shinhan Investment Corp announced on November 4 that it has lowered its operating profit estimate for LG Energy Solution for 2027 and adjusted its target stock price from 500,000 won to 460,000 won, reflecting a decline in industry valuations. However, the company expects a 279% increase in operating profit for 2027 compared to the previous year, driven by expanded production capacity and increased shipments of energy storage systems (ESS) in North America.
Lee Jin-myung, a senior researcher at Shinhan Investment Corp, stated, "The operating profit for 2027 is projected to reach 3.81 trillion won, marking a 279% increase from the previous year and surpassing the record of 2.16 trillion won set in 2023. Operating profit, excluding the Advanced Manufacturing Production Tax Credit (AMPC), is also expected to turn positive, indicating an improvement in profit quality."
The company's third-quarter results exceeded market expectations, thanks to compensation from clients and increased ESS shipments. Operating profit reached 756 billion won, a 567% increase from the previous quarter. Lee noted, "The factors contributing to the strong performance include client compensation, increased ESS shipments, and the expansion of AMPC. It is estimated that ESS revenue reached 3.2 trillion won, with an operating profit of 236 billion won due to alleviated bottlenecks in pack and link production."
For 2027, ESS revenue is projected to be 17 trillion won, a 50% increase from the previous year, with operating profit expected to rise by 247% to 2.3 trillion won. He added, "North American ESS production capacity is set to expand to 70 GWh by the end of next year, and a backlog of orders totaling 160 GWh will largely fulfill the 2028 demand. The expansion of AI data centers (AIDC) is expected to increase direct purchases of battery energy storage systems (BESS) by big tech companies, further boosting local LFP production capacity."
The target stock price has been adjusted down by 8% to 460,000 won, reflecting a 7% reduction in the 2027 operating profit estimate and a decline in industry valuations. However, Lee assessed that re-evaluation factors are increasing.
Lee stated, "The direct supply of BESS to big tech companies and partnerships with Nvidia are expected to benefit AIDC. The momentum from new products such as the 46 series, LFP tabless 2170, and sodium-ion batteries, along with improved utilization rates in Europe, will also contribute to the re-evaluation factors for electric vehicle (EV) recovery."
* This article has been translated by AI.
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