KOSPIBatteries020150

Lotte Energy Materials

₩51,400▲ 19.67%2026-10-02 close

Market Cap

₩2.7T

Turnover

₩68.8B

Volume

1.4M

Shares out.

52.4M

PER

—

PBR

1.1×

EPS

-₩1,542

Dividend Yield

0.00%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩0 per share · Prices as of the 2026-10-02 close

Report overview

Circuit Foil Pivot and Utilization Recovery: A Fork in the Loss-Narrowing Path

After a heavy 2025 loss driven by weak EV battery foil demand, the company has been reshaping its mix toward AI data center circuit foil and North American ESS battery foil, sharply narrowing losses in the first half of 2026.

1
2025 revenue was KRW 677.5bn with an operating loss of KRW 145.2bn (-21.4% margin); the loss narrowed to KRW 5.0bn in 1Q26 and KRW 16.9bn in 2Q26.
2
Utilization is recovering: per reported quarterly filings it rose from 47.4% in 2025 to 66.6% in 1Q26 and 72.1% in 2Q26, while management cited 77% overall on the 2Q call and guided to further gains in 2H.
3
At its July 2026 CEO IR Day the company disclosed a plan to expand Iksan circuit foil capacity from 3,700 tons to 6,700 tons in 2026 and 16,000 tons by 1H 2027.
4
Malaysia plant 5 began full operation in July 2026 and plant 6 is targeted for early startup in 4Q, though ramp-up costs and higher depreciation weigh on near-term earnings.
5
The debt-to-equity ratio was 23.2% at end-2025, a relatively low level, and proceeds from the sale of non-core subsidiary Lotte Ecowall are earmarked for copper foil investment.

Business structure

Lotte Energy Materials is a materials company centered on electrolytic copper foil, split into battery foil used as the anode current collector in secondary batteries and circuit foil used in printed circuit boards and copper clad laminates.

Electrolytic copper foil is the core segment, and the company is described as the only listed Korean producer mass-producing circuit foil, with a portfolio spanning commodity grades as well as high-value HVLP and ultra-thin foil for packaging.

According to the company, circuit foil accounted for around 15% of total revenue as of 1Q 2026. Production is split between Iksan in Korea and Malaysia, and battery foil lines at the Iksan plant, the country's only circuit foil site, are being converted to AI circuit foil lines.

The Malaysian complex is being developed as a production base for ESS battery foil. SK Securities noted in an April 2026 report that the company had begun converting 15,000 tons of its 55,000-ton battery foil capacity to circuit foil from the first half.

The product mix is being reshaped around AI data center demand, and management stated it holds a full materials portfolio for data centers, from HVLP circuit foil and ultra-thin foil for semiconductor packaging to high-end battery foil for ESS and battery backup units as well as thick foil products.

On customers, the company said it has secured big tech approvals for next-generation AI accelerator products and is expanding share through close cooperation with major clients, and on the 1Q 2026 call it outlined a target of over 30% share in HVLP circuit foil for AI networking within three years, first building mass-production references with a key domestic customer and then expanding to CCL and PCB makers in Taiwan and China.

Korea's CCL supply chain consists of copper foil suppliers (Lotte Energy Materials, SK Nexilis), CCL makers (Doosan, LG Chem) and board makers (Samsung Electro-Mechanics, Daeduck Electronics), placing the company in competition with SK Nexilis and Chinese and Japanese peers at the foil stage.

In addition, the company said second- and third-generation LFP cathode materials have completed development and are under approval evaluation at ten customers, and that it is reviewing commercialization of 1GWh of all-solid-state battery materials in 2028 based on scale-up data from its solid electrolyte pilot plant.

Earnings trend

Quarterly revenue · Operating profit

₩204.9B-₩31.1B25Q2₩143.7B-₩34.3B25Q3₩170.9B-₩33.8B25Q4₩159.8B-₩5B26Q1₩194.2B-₩16.9B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩729.4B₩84.8B2022₩809B₩11.8B2023₩902.3B-₩64.4B2024₩677.5B-₩145.2B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩204.9B	-₩31.1B	−15.2%
2025Q3	₩143.7B	-₩34.3B	−23.9%
2025Q4	₩170.9B	-₩33.8B	−19.8%
2026Q1	₩159.8B	-₩5B	−3.1%
2026Q2	₩194.2B	-₩16.9B	−8.7%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩729.4B	₩84.8B	₩43.8B	11.6%	3.0%	22.1%
2023	₩809B	₩11.8B	-₩32.5B	1.5%	−2.3%	21.7%
2024	₩902.3B	-₩64.4B	₩6.3B	−7.1%	0.5%	20.0%
2025	₩677.5B	-₩145.2B	-₩157.5B	−21.4%	−9.5%	23.2%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

For 2025 the company posted revenue of KRW 677.5bn and an operating loss of KRW 145.2bn, an operating margin of -21.4%.

That extended a multi-year erosion from 2022 revenue of KRW 729.4bn and operating profit of KRW 84.8bn (11.6% margin), through KRW 11.8bn of operating profit in 2023 (1.5%) and a KRW 64.4bn operating loss in 2024 (-7.1%), while revenue itself fell 24.9% from KRW 902.3bn in 2024 to KRW 677.5bn in 2025.

Net loss attributable to owners widened to KRW 157.5bn in 2025, versus a KRW 32.5bn loss in 2023 and KRW 6.3bn of attributable profit in 2024, and operating cash flow swung from an KRW 87.0bn inflow in 2024 to a KRW 11.1bn outflow in 2025.

Quarterly, operating losses ran at KRW 31.1bn in 2Q25, KRW 34.3bn in 3Q25 and KRW 33.8bn in 4Q25, with 3Q25 revenue bottoming at KRW 143.7bn. In 1Q 2026 revenue was KRW 159.8bn and the operating loss shrank to KRW 5.0bn (-3.1% margin), with a small attributable net profit of KRW 1.6bn.

On the 1Q call management explained that beyond cost innovation and utilization gains, a raw material lagging effect as copper rose from around USD 9,000 per ton in 3Q last year to the USD 13,000 range contributed substantially to the improvement, and that such factors would dilute from 2Q.

In 2Q 2026 revenue rose 21% quarter on quarter to KRW 194.2bn, but the operating loss widened again to KRW 16.9bn (-8.7% margin) with an attributable net loss of KRW 20.5bn.

Compared with the year-earlier quarter (2Q25 revenue KRW 204.9bn, operating loss KRW 31.1bn) the loss was smaller, and first-half 2026 totals come to roughly KRW 354.0bn of revenue and a KRW 21.9bn operating loss.

The balance sheet remains lightly levered with a 23.2% debt-to-equity ratio at end-2025, and in its 2Q 2026 preliminary release the company said it was maintaining a 31.5% debt ratio and an 18% borrowings ratio.

Industry analysis

The copper foil cycle sits at the intersection of slowing EV demand and surging AI and energy storage demand.

IBK Investment & Securities noted in a November 2025 report that Europe was seeing more low-cost Chinese battery shipments while in the US the removal of EV subsidies from September 2025 pushed utilization down to the mid-30% range.

By contrast, falling plant utilization began to rebound on strength in ESS copper foil, as interest in energy storage grew in North America where AI data center construction is concentrated.

In 1Q 2026 SK Nexilis averaged 69.6% utilization while Lotte Energy Materials averaged 66.6% across Iksan and Malaysia, both up more than 10 percentage points year on year. The board materials side shows a sharper shortage.

Prices of copper clad laminate, the key PCB material, have surged on supply falling short of demand, with the April 2026 average export price at USD 30,998, up 65.2% year on year.

Commodity foil roughness is 2-3 microns whereas HVLP is only 0.5-1 micron, requiring difficult post-treatment that sharply cuts yields, and such high-performance foil is estimated to command processing fees 150-200% above commodity circuit foil.

On pricing, analysts point to easing oversupply as Chinese industrial restructuring, North American market expansion and US tariff barriers converge, with major Chinese foil makers raising prices, though SKC cautioned that while the market is turning supplier-friendly, price increases require thorough discussion with customers.

SKC projected the global ESS market to expand from 390GWh in 2025 to 920GWh in 2030. In competitive positioning, the company leans on its status as Korea's only circuit foil producer, while SK Nexilis's parent pursues separate new businesses such as semiconductor glass substrates.

Outlook

Management's stated direction pairs rising utilization with a heavier high-value mix. The company said it brought Malaysia plant 5 into full operation from July 2026 and will pull forward plant 6 to start within the fourth quarter, shifting the Malaysian battery foil complex to full production and full sales.

On the 2Q call it said overall utilization rose from the high 40% range last year to 77% in 2Q with volumes up about 30% quarter on quarter, and that falling warehouse inventory alongside rising in-transit inventory pointed to continued utilization gains in the second half.

However, management flagged temporary cost increases during the second-half ramp-up for production stabilization, and said first-half tailwinds such as the raw material lagging effect and inventory drawdown would fade.

In circuit foil, HVLP1 has been in mass production and supply since 1Q and grade 3 and above products entered mass production in 2Q, with the company expecting a clear increase in supply volumes from 3Q and 4Q.

On capacity, the plan is to accelerate Iksan circuit foil capacity from 3,700 tons to 6,700 tons in 2026 and 16,000 tons in 1H 2027, with additional expansion including ultra-thin foil under review depending on customer demand.

Further expansion is being considered on spare land at the domestic plant or at a third site, to be pursued when binding customer contracts and economics are secured, while concept design and other preparatory work proceeds.

On funding, the company completed the sale of construction subsidiary Lotte Ecowall and said proceeds will be used to fund copper foil investment.

As for market estimates, Datanews reported in September 2026 that a compilation of reports from seven brokerages including NH Investment & Securities, DS Investment & Securities, Shinhan Securities, Kiwoom Securities, Eugene Investment & Securities, Samsung Securities and SK Securities showed an average 2026 operating loss estimate of KRW 52.9bn and an average 2027 operating profit estimate of KRW 30.8bn, with all seven forecasting a return to annual profit next year.

Valuation

PER

—

PBR

1.1×

ROE

-4.8%

EPS

-₩1,542

BPS

₩32,896

Dividend per share

₩0

With attributable net income negative over the most recent four quarters, an earnings-based multiple cannot be computed and the price-to-earnings figure is not displayed on the data card.

That shifts the discussion to net-asset-based multiples and the pace of loss reduction; the shares trade above book value per share, which can be read as partly reflecting expectations for the circuit foil pivot and capacity expansion.

No cash dividend was paid per the latest disclosure, so a yield-based approach is not available, while the low debt-to-equity ratio at end-2025 is cited as a cushion for an asset-based view. Brokerage views diverge.

SK Securities said in an April 2026 report that it maintained a buy rating and raised its target price to KRW 90,000, while Samsung Securities said in an April 2026 report that it lifted its target price to KRW 48,000 on a higher book-value-per-share estimate but kept a neutral rating.

Kyobo Securities stated in a June 2026 report that it estimates 2027 consolidated revenue of KRW 1,320.5bn and operating profit of KRW 73.4bn, a return to profit. For earnings-based multiples to become meaningful, investors would first need to see whether expanding circuit foil volumes offset ramp-up costs.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

AI circuit foil shortage and sole domestic mass-production status

The company said rapid AI industry growth will structurally prolong a global shortage of circuit foil, and that high-end grades such as HVLP and ultra-thin foil face high technical barriers and difficult mass production, leaving limited supply concentrated among a few big-tech-approved players.

Its position as Korea's only listed circuit foil mass producer, together with analysis that high-performance foil commands processing fees 150-200% above commodity grades, is cited as grounds for mix improvement. The higher the circuit foil share, the greater the room for company-wide operating margin improvement.

Utilization recovery and a shift toward non-EV demand

Per reported quarterly filings, utilization rose from 47.4% in 2025 to 66.6% in 1Q 2026 and 72.1% in 2Q. In 2Q, growth in non-EV categories such as ESS, battery backup units, power-tool battery foil and AI circuit foil drove results rather than EV battery foil.

Management said output is heading straight to customer plants rather than into inventory, with North American ESS, battery foil for 4680 cylindrical cells and HVLP foil for AI accelerators leading volume growth. Reported quarterly revenue also recovered from KRW 143.7bn in 3Q 2025 to KRW 194.2bn in 2Q 2026.

Low leverage and non-core asset disposals

The debt-to-equity ratio was 23.2% at end-2025, keeping financial leverage low despite large losses. The company completed the sale of construction subsidiary Lotte Ecowall and said the proceeds would fund copper foil investment.

It said the funds would go toward expanding high-value lines including circuit foil for AI data centers, ultra-thin foil for semiconductors, and battery foil for ESS and EV batteries. This absorbs part of the funding burden through internal asset disposals during an expansion phase.

Bear factors

Continuing losses and yield issues in high-end products

The 2Q 2026 operating loss of KRW 16.9bn was wider than the KRW 5.0bn of the prior quarter, with an attributable net loss of KRW 20.5bn.

Analysts note that one-off factors in 1Q such as the copper price lagging effect and reversal of inventory valuation losses disappeared in 2Q, and attribute continuing losses to low battery foil prices plus weak yields on high-end products such as 6-micron ESS battery foil and HVLP grades 3 and 4.

In other words, revenue growth alone may not translate into earnings improvement without yield and pricing gains.

Ramp-up costs and rising depreciation

Management said temporary cost increases are unavoidable during the second-half ramp-up to stabilize production, and that first-half tailwinds such as the lagging effect and inventory drawdown would diminish.

New plant startups bring higher fixed costs and depreciation in the near term, and observers warn that the break-even timeline could slip if yields and prices do not improve alongside shipment growth.

A peer case illustrates the point: SKC's copper foil business posted record quarterly revenue in 2Q but saw limited profitability improvement due to depreciation and initial operating costs from its second Malaysian plant.

Lingering weakness in EV end-demand

IBK Investment & Securities said in a November 2025 report that Europe saw more low-cost Chinese battery shipments while the September 2025 removal of US EV subsidies pushed utilization down to the mid-30% range.

Analysis also pointed to weak battery foil supply to a key customer as the main reason 2025 revenue fell 25% year on year. Confirmed figures show 2025 revenue of KRW 677.5bn, down sharply from KRW 902.3bn in 2024.

Even as circuit foil and ESS grow, battery foil still accounts for the majority of sales, leaving exposure to EV policy and demand swings.

Risk factors

End-market policy and demand volatility

Changes in US EV subsidy policy and the pace of ESS investment feed directly into battery foil shipments. Analysis of 4Q 2025 noted that a production halt at a strategic North American customer pulled overall utilization down to around 45%, with the Malaysian plant at roughly 43%.

That episode shows how a single large customer's operating plans can swing quarterly earnings. The pace of AI data center investment likewise governs assumptions for circuit foil volumes.

Raw material prices and reversal of the lagging effect

Copper accounts for a large share of copper foil costs, and input timing distortions can dominate quarterly results.

Management explained that copper rising from around USD 9,000 per ton in 3Q last year to the USD 13,000 range in 1Q 2026 produced a large lagging-effect gain in 1Q, and that this factor would dilute from 2Q. The 2Q 2026 operating loss indeed widened from the prior quarter. If copper prices reverse lower, inventory valuation pressure could appear in the opposite direction.

Execution of expansion and customer qualification risk

The plan to sharply raise circuit foil capacity by 1H 2027 presupposes customer qualification and yield attainment. The company said further expansion will proceed only when binding customer contracts and economics are secured, with preparatory work underway for now.

For LFP cathode materials it said approval evaluations are running at ten customers with two more approvals expected in the second half, and that it has secured land at Iksan for 20,000-30,000 tons of annual capacity. Delays in qualification or downgraded demand forecasts could lengthen the payback period.

What to watch next

Late October to early November 2026
At the third-quarter results and conference call, check whether utilization exceeded the 2Q level (72.1% per reported filings) and how much ramp-up costs offset revenue growth. The key is whether management's guidance for higher second-half utilization materializes.
Fourth quarter of 2026
Verify whether the plan to start Malaysia plant 6 early within the fourth quarter is actually executed. An early start means higher shipments but also higher fixed costs and depreciation, so the earnings impact can cut both ways.
4Q 2026 to 1Q 2027
Watch whether supply volumes of HVLP grade 3 and above, which entered mass production in 2Q, increase markedly as management expects, and how far the circuit foil revenue share rises from around 15% in 1Q 2026, the practical gauge of mix improvement.
Early February 2027
This is when full-year 2026 audited results and the 2027 business plan are typically disclosed. Compare the brokerage average estimates (2026 operating loss of KRW 52.9bn, 2027 operating profit of KRW 30.8bn) with actual reported figures, and check the pricing and utilization assumptions management presents.
First half of 2027
Key items are whether Iksan circuit foil capacity reaches 16,000 tons and the final decision on further expansion including ultra-thin foil investment. Whether that additional capacity goes on spare land at the domestic plant or at a third site is also worth watching.

Overall view

Lotte Energy Materials' last four years traced a descending profitability curve, from an 11.6% operating margin in 2022 to 1.5% in 2023, -7.1% in 2024 and -21.4% in 2025, with 2025 revenue falling 24.9% to KRW 677.5bn alongside a KRW 145.2bn operating loss and a KRW 157.5bn attributable net loss.

Into 2026, operating losses narrowed year on year to KRW 5.0bn in 1Q and KRW 16.9bn in 2Q, but quarterly losses persist, and the 1Q improvement included temporary factors such as the copper price lagging effect the company itself cited.

Structurally, the business is shifting from EV battery foil toward circuit foil for AI data centers and products for North American ESS and battery backup units, with management stating a plan to lift Iksan circuit foil capacity to 16,000 tons by 1H 2027.

The bull case rests on its status as Korea's only circuit foil mass producer, recovering utilization, a low debt ratio and investment funding from non-core asset sales. The bear case rests on weak yields in high-end products, second-half ramp-up costs and rising depreciation, and structurally soft EV end-demand.

Because losses make earnings multiples uncomputable, the debate centers on net-asset comparisons and the pace of loss reduction, and brokerage opinions are split between buy and neutral.

What ultimately needs verification is the point at which circuit foil volumes and prices outgrow ramp-up costs; this report is for information purposes and contains no buy or sell recommendation.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

Show 18 more articles and sources

Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.