LG Energy Solution Earnings: Revenue and Profit Missed on Slow EV Battery Demand Growth

March-quarter revenue and operating profit for LG Energy Solution, or LGES, were both weaker than we expected. Management attributed the revenue decline to weak battery demand from electric vehicle, or EV, and energy storage makers and a fall in battery prices due to the lithium price drop. We lower our 2024-26 revenue estimates by 2%-3% due to a reduced outlook for EV battery demand. To factor in the margin weakness in EV battery sales, we reduce our 2024-26 operating income forecasts by 8%-21%. We reduce our fair value estimate to KRW 311,000 per share from KRW 366,700, which corresponds to 49 times P/E and 16 times enterprise value/EBITDA on a 2024 basis.