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LG Energy Solution Ltd 373220

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Stock XKRX Rating as of
KRW 391,000.00 +2,000.00 (0.51%)
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As of Delayed Price Closed
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Company Report

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

Vincent Sun

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.

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Price vs Fair Value

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373220 is trading at a 26% premium.
Price
KRW 391,000.09
Fair Value
KRW 489,777.00
Uncertainty
High
1-Star Price
KRW 566,446.00
5-Star Price
KRW 222,762.00
Economic Moat
Lnyrz
Capital Allocation
Bycqdxlc

Bulls Say, Bears Say

Bulls

Owing to robust demand, the EV battery business will reach at least a high-single-digit operating margin near-term and continue to drive LGES' margin expansion.

Bears

The profitability of EV batteries doesn’t improve as expected because of price competition, heavy upfront costs, and lower production yields.

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Trading Information

Previous Close Price
KRW 389,000.00
Day Range
KRW 387,000.00–394,000.00
52-Week Range
KRW 358,000.00–620,000.00
Bid/Ask
KRW 389,000.00 / KRW 391,500.00
Market Cap
KRW 91.49 Tril
Volume/Avg
121,565 / 189,087

Key Statistics

Price/Earnings (Normalized)
60.02
Price/Sales
2.71
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
—
Total Yield
—

Company Profile

LG Energy Solution, or LGES, is the third-largest battery maker for electric vehicles, or EVs, with about 15% global share in 2023, according to SNE Research. The EV battery segment is the largest revenue contributor, which accounted for more than 60% of total revenue in 2023. Besides EV batteries, LGES also manufactures batteries for mobility, mobile phones, laptops, electrical devices, and energy storage systems. The company was spun off from LG Chem’s battery division in December 2020 and listed on the Korea Exchange in January 2022. It has global manufacturing facilities in Korea, China, Poland and the United States. Key customers include General Motors, Tesla, Volkswagen, Hyundai Motors and Stellantis.
Sector
Industrials
Industry
Specialty Industrial Machinery
Stock Style Box
Large Growth
Total Number of Employees
11,793
Website
https://www.lgensol.com

Competitors

Valuation

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Metric
373220
006400
300750
Price/Earnings (Normalized)
 60.0214.0617.24
Price/Book Value
 4.531.584.29
Price/Sales
 2.711.261.94
Price/Cash Flow
 19.389.427.57
Price/Earnings
373220
006400
300750

Financial Strength

Metric
373220
006400
300750
Quick Ratio
 0.980.63—
Current Ratio
 1.571.08—
Interest Coverage
 6.919.78—
Quick Ratio
373220
006400
300750

Profitability

Metric
373220
006400
300750
Return on Assets (Normalized)
 4.70%6.53%6.11%
Return on Equity (Normalized)
 10.06%12.10%22.01%
Return on Invested Capital (Normalized)
 6.49%9.35%11.60%
Return on Assets
373220
006400
300750
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