KOSPIBatteries373220

LG Energy Solution

₩370,000▲ 2.64%2026-10-02 close

Market Cap

₩86.8T

Turnover

₩76.7B

Volume

210,000 shares

Shares out.

230M

PER

—

PBR

3.8×

EPS

-₩7,193

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

Pivot to ESS: The Question Is Whether the Turnaround Sticks

With EV battery demand stalled, ESS and cylindrical cells have revived the top line, yet excluding North American production tax credits the core business was still loss-making.

1
Second-quarter 2026 revenue of KRW 7.5602tn and operating profit of KRW 113.3bn marked a return to operating profit after two quarters, but the owners' net loss of KRW 377.5bn continued.
2
The company disclosed KRW 241.0bn of North American production credits in the second quarter, and an operating loss of KRW 127.7bn excluding them, making core profitability the key item to verify.
3
First-half ESS revenue grew 4.6-fold year on year, lifting its share of company revenue to the high-20% range, and management plans to secure over 50GWh of North American ESS capacity by year-end.
4
The GM joint venture Ultium Cells restarted its Ohio plant on 17 August 2026 after seven months, a variable directly tied to EV cell shipments and the scale of tax credits.
5
The 2025 debt-to-equity ratio rose sharply to 129.0% from 94.7% a year earlier, and the owners' net loss extended into a second consecutive year.

Business structure

LG Energy Solution is a dedicated battery maker spanning pouch and cylindrical EV cells, ESS batteries and system integration, with plants in Ochang in Korea as well as North America, Europe and China.

Its EV business is anchored on lower-priced solutions such as high-voltage mid-nickel and lithium iron phosphate (LFP) plus the ramp of the 46-series, while cylindrical shipments rose 1.5 times year on year in the second quarter of 2026 on 46-series mass production and steady 2170 demand.

ESS was addressed by converting EV capacity, and first-half 2026 ESS revenue grew 4.6-fold year on year, taking its share of company revenue into the high-20% range.

The customer base is split between automakers such as GM, Tesla and Honda and North American utilities and data-centre operators, and the contracting entity for ESS deals is Vertech, the wholly owned US system-integration unit.

North American ESS production is spread across five sites: Holland and Lansing in Michigan, NextStar Energy in Canada, the Ultium Cells Tennessee plant and the Honda joint-venture plant.

Ultium Cells, the GM joint venture, has combined annual capacity of about 90GWh across its Ohio plant one and Tennessee plant two, while the Lansing plant three was taken over solely by the company and removed from the joint-venture structure.

Competition comes from Samsung SDI and SK On at home and Chinese LFP makers abroad; LG Energy Solution was the only Korean name on BloombergNEF's tier-1 ESS list, whereas no Korean company made it a year earlier, and 48 of the 59 listed firms were Chinese.

In new businesses, the company is discussing cylindrical battery supply with six leading global robotics firms and is extending applications into vessels, urban air mobility and aerospace.

Earnings trend

Quarterly revenue · Operating profit

₩5.6T₩492.2B25Q2₩5.7T₩601.3B25Q3₩6.1T-₩122B25Q4₩6.6T-₩207.8B26Q1₩7.6T₩113.3B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩25.6T₩1.2T2022₩33.7T₩2.2T2023₩25.6T₩575.4B2024₩23.7T₩1.3T2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩5.6T	₩492.2B	8.8%
2025Q3	₩5.7T	₩601.3B	10.5%
2025Q4	₩6.1T	-₩122B	−2.0%
2026Q1	₩6.6T	-₩207.8B	−3.2%
2026Q2	₩7.6T	₩113.3B	1.5%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩25.6T	₩1.2T	₩767.2B	4.7%	4.1%	86.0%
2023	₩33.7T	₩2.2T	₩1.2T	6.4%	6.1%	86.4%
2024	₩25.6T	₩575.4B	-₩1T	2.2%	−4.8%	94.7%
2025	₩23.7T	₩1.3T	-₩1.1T	5.7%	−5.3%	129.0%

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

On an annual basis, 2023 was the peak with revenue of KRW 33.7455tn and operating profit of KRW 2.1632tn (6.4% margin), followed by a sharp retreat in 2024 to revenue of KRW 25.6196tn and operating profit of KRW 575.4bn (2.2%).

Revenue slipped further to KRW 23.6718tn in 2025 while operating profit recovered to KRW 1.3461tn (5.7%), and the company said KRW 332.8bn of North American production credits were reflected in fourth-quarter 2025 results.

The bottom line tells a different story: consolidated net profit in 2025 was KRW 80.8bn, yet the loss attributable to owners was KRW 1.0728tn, reflecting a joint-venture structure in which earnings attributable to non-controlling interests (equity of KRW 9.1061tn) rose sharply, following an owners' net loss of KRW 1.0187tn in 2024 as well.

Quarterly, operating profit peaked at KRW 601.3bn with an owners' net profit of KRW 247.2bn in the third quarter of 2025, then deteriorated to an operating loss of KRW 122.0bn with an owners' net loss of KRW 876.8bn in the fourth quarter and an operating loss of KRW 207.8bn with a net loss of KRW 676.0bn in the first quarter of 2026.

The second quarter of 2026 delivered revenue of KRW 7.5602tn and operating profit of KRW 113.3bn, a return to operating profit, but the owners' net loss of KRW 377.5bn persisted, keeping the gap between operating and net results wide.

Because the company changed presentation from the first quarter of 2026 to record North American production credits within revenue and other income, and restated prior periods on the same basis, prior-year comparatives in IR materials differ from previously filed figures.

Second-quarter 2026 tax credits were KRW 241.0bn; excluding them, revenue was KRW 7.3193tn and the operating result a loss of KRW 127.7bn.

Cash generation held up relatively well, with operating cash flow of KRW 4.4323tn in 2025 and KRW 5.1117tn in 2024 (versus an outflow of KRW 579.8bn in 2022), but total liabilities grew from KRW 29.3402tn in 2024 to KRW 37.8263tn in 2025, lifting the debt-to-equity ratio from 94.7% to 129.0%.

CFO Lee Chang-sil said revenue rose 15% quarter on quarter on higher shipments of lower-priced EV products and cylindrical cells plus expanded North American ESS capacity, with ESS growing more than 30% led by North America and Europe.

Industry analysis

End markets have split in two: EV demand has been stagnant for an extended period, while ESS is expanding quickly on the back of AI data-centre power needs. After the US scrapped EV purchase subsidies in October 2025, related battery demand fell and the North American EV slowdown dragged on.

On the ESS side, SNE Research projects the global ESS battery market to grow more than 2.5-fold from 235GWh in 2024 to 618GWh in 2035, and BloombergNEF forecasts US data-centre power consumption to more than double from 180TWh in 2025 to 391TWh by 2030.

Beyond grid-scale ESS linked to renewables, demand is broadening into standalone and long-duration storage as well as behind-the-meter applications where data centres build their own power infrastructure, including uninterruptible power supplies and battery backup units.

On competitive positioning, CEO Kim Dong-myung has argued that the company is effectively the only player combining North American plants, operating experience and system-integration-based turnkey capability.

Even so, global ESS supply remains centred on Chinese makers, leaving cost gaps and price pressure as constants.

Among domestic peers, Samsung SDI posted a 2025 annual operating loss of KRW 1.72tn, its first trillion-won annual loss since founding, underscoring that the sector is passing through a cyclical trough, while GM's termination of its Synergy Cells joint venture with Samsung SDI and the sale of its entire 49.99% stake illustrates the reshuffling of North American joint-venture arrangements.

Outlook

Management's 2026 direction is explicit: it guided to revenue growth in the mid-teens to 20% range and targeted a year-on-year increase in operating profit, with ESS and small cylindrical growth offsetting lower EV pouch revenue.

Financial strategy shifted from aggressive expansion to selectivity, cutting production facility investment by more than 40% year on year and focusing on utilising existing assets and converting lines rather than building new plants.

On orders, the annual ESS new-order target is set above 90GWh, a record level, with the cumulative ESS backlog already exceeding 140GWh.

Progress still needs verification: Joo Min-woo of NH Investment & Securities said in May 2026 that new orders this year were estimated in the low-10GWh range and that more than 70GWh could come in the second half.

Separately, the company said it secured more than KRW 3tn of new ESS orders in the first half of 2026, including AI data-centre projects.

On capacity, the Lansing plant in Michigan is due to start production within the year, taking North American ESS capability above 50GWh by year-end, and in cylindrical cells, after starting 4695 mass production at Ochang at the end of 2025, the Arizona plant in the US is scheduled to begin producing sizes from 4680 to 46120 at the end of 2026.

On the EV side, the GM joint-venture battery plant in Ohio restarted after seven months, with most laid-off staff returning and production resuming on 17 August 2026. For liquidity, the company disclosed in May 2026 that it sold buildings and related assets of the Honda joint venture to Honda, securing KRW 3.7416tn.

Valuation

PER

—

PBR

3.8×

ROE

-8.0%

EPS

-₩7,193

BPS

₩95,482

Dividend per share

₩0

Because the result attributable to owners was negative across the last four quarters (third quarter of 2025 through second quarter of 2026), a price-to-earnings multiple cannot be computed, leaving valuation dependent on asset value and forward earnings estimates.

The price-to-book multiple sits at a meaningful premium to net assets and above the average multiple for large Korean manufacturers, implying that the market is pricing the ESS backlog and future cash generation from North American plants rather than current earnings.

In terms of direction alone, earnings have been highly volatile: a profit peak in 2023, a sharp drop in 2024, an operating profit recovery in 2025 and an operating loss in the first half of 2026, with the owners' result in the red for two consecutive years. iM Securities, in a 30 June 2026 report, cited a price-to-earnings multiple of about 23.5 times on 2028 estimates and judged that valuation burden had eased considerably versus the EV-driven rally of 2020-2023.

On price targets, analyst Yoo Ji-woong at Daol Investment & Securities maintained KRW 550,000 in a report dated 8 July 2026, while analyst Lee Jin-myung at Shinhan Securities presented a target lowered to KRW 500,000 from KRW 550,000 in a report dated 31 July 2026.

No cash dividend per share is confirmed in the latest filings, so dividend metrics are not computed, and the crux of the valuation debate is when the core business turns profitable excluding tax credits.

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

Structural ESS demand and a North American manufacturing edge

The company expects ESS market growth to continue as AI technology spreads and data-centre investment expands.

With behind-the-meter demand broadening battery applications, management plans to expand pouch-LFP-centred ESS capacity this year and add prismatic lines next year to maximise customers' investment tax credit benefits.

Supply capability that meets US domestic-content requirements differentiates the company for customers seeking non-Chinese supply chains. Management plans to lift global ESS capacity above 60GWh by year-end, with 50GWh of that placed in North America.

46-series backlog and expanding cylindrical shipments

The company said discussions on next-generation EV projects with multiple customers materialised into more than 100GWh of additional volume versus end-2025, taking the 46-series backlog above 440GWh.

The 46-series uses a rigid can and tabless design to improve structural and thermal stability, and the company plans to serve customers with a lineup from 4680 to 46120 built on Ochang and US capacity.

Cylindrical shipments rising 1.5 times year on year in the second quarter of 2026 shows this axis converting into actual revenue. That said, the timing of backlog conversion depends on customers' own production schedules.

Room for improvement in utilisation and cost structure

The company said second-quarter earnings turned positive thanks to better utilisation in Europe, a higher mix of high-margin cylindrical sales and a gradual reduction in fixed-cost burden from increased North American ESS output.

Adding the restart of the GM joint-venture plant in Ohio, there is remaining room for improvement in North American line utilisation itself.

Management said it would strengthen cash generation through profitability-focused operations, raise funds by selling non-core assets such as joint-venture buildings and investment stakes, and maintain a stance of maximising use of existing assets while minimising capital spending. Operating cash flow staying above KRW 4tn in both 2024 and 2025 supports that transition.

Bear factors

Still loss-making once tax credits are stripped out

Excluding KRW 241.0bn of tax credits in the second quarter of 2026, revenue was KRW 7.3193tn and the operating result a loss of KRW 127.7bn. On that basis the operating margin was minus 1.7%, meaning the core business remained in the red.

For the first quarter, one calculation showed that excluding KRW 189.8bn of credits widened the underlying operating loss to about KRW 400bn. Where subsidies account for a large share of profit, policy changes can feed directly into earnings.

Uncertainty in EV demand and customer inventories

The company said first-quarter earnings fell quarter on quarter on early-stage stabilisation costs from expanding North American ESS sites and lower EV pouch volumes from a strategic customer.

Hana Securities noted that monthly EV sales in the US and Europe are highly volatile, that US growth slowed after 2025, and that rather than assuming a battery shipment recovery investors should check second-half sales data alongside a recovery in customer orders.

Whether the Ohio restart translates into stable utilisation depends on GM's sales pace. How much ESS offsets declining pouch EV revenue is a question that has to be re-verified each quarter.

Persistent owners' losses and rising financial leverage

Losses attributable to owners occurred in both 2024 and 2025 (KRW 1.0187tn and KRW 1.0728tn respectively), and net losses continued in the first and second quarters of 2026. Total liabilities rose from KRW 29.3402tn in 2024 to KRW 37.8263tn in 2025, lifting the debt-to-equity ratio to 129.0%.

Under the joint-venture structure, a significant portion of consolidated profit accrues to non-controlling interests, which stood at KRW 9.1061tn at end-2025.

Hana Securities flagged remaining risks including operating profit missing consensus, deferral of North American joint-venture compensation, ESS fixed-cost burden, and a 2026 net loss alongside a high debt ratio.

Risk factors

Policy and subsidy dependence

A significant portion of earnings is linked to the US Inflation Reduction Act's advanced manufacturing production credit (45X). The second-quarter 2026 profit reflected a large contribution from these credits, totalling KRW 241.0bn.

As shown when US EV subsidies were scrapped in October 2025 and related battery demand fell, regulatory changes act on both demand and profit at once. Because credit amounts scale with output, a drop in utilisation can amplify the earnings decline.

Customer and joint-venture concentration

North American EV volumes are heavily tied to the GM joint venture Ultium Cells, and cylindrical cells to strategic customers such as Tesla. Ultium Cells temporarily halted some plant operations as part of production adjustments amid slowing EV demand, and this was cited as a cause of weak first-quarter results.

Selling the Honda joint venture's building assets secured liquidity, which helps funding but changes the nature of fixed costs as the arrangement shifts to leasing. Any change in joint-venture structures or customer strategy could affect both volumes and accounting.

Price competition and raw-material volatility

Global ESS supply is dominated by Chinese makers; 48 of the 59 companies on BloombergNEF's tier-1 list were Chinese. Intensifying price competition in LFP-based products puts pressure on selling prices and margins.

It has also been noted that the ESS segment, which includes fixed-price contracts, can face margin pressure when metal prices rise. In addition, sequential start-ups of new North American plants generate ramp-up costs each quarter, and delays in yield stabilisation could leave results below expectations.

What to watch next

Early October 2026
Preliminary third-quarter 2026 results. The key items are whether the operating result excluding tax credits moves out of loss, and how much the Ultium Cells Ohio restart shows up in EV cell shipments.
Late October 2026
Third-quarter earnings call. This is the point to check management commentary on the achievability of the guidance given early in the year for mid-teens to 20% revenue growth and higher year-on-year operating profit, plus the direction of ESS segment profitability.
Fourth quarter of 2026
Verify whether the Lansing plant in Michigan starts production within the year and North American ESS capacity exceeds 50GWh, and whether the Arizona plant begins mass production of 4680 to 46120 cylindrical cells on schedule.
Through end-2026
Progress against the annual ESS new-order target of more than 90GWh. Since the company said it secured over KRW 3tn of new orders in the first half, including AI data-centre projects, second-half large-contract disclosures will determine the completion rate.
Late January to February 2027
Confirmation of full-year 2026 results and 2027 guidance. This is when medium-term financial strategy is updated, including capital spending, ESS order targets, prismatic ESS line plans and dividend policy.

Overall view

LG Energy Solution sits in the middle of a shift from an EV-battery-centred structure toward ESS and cylindrical cells, and its results show the cost of that transition.

Revenue of KRW 23.6718tn and operating profit of KRW 1.3461tn in 2025 restored the operating margin to 5.7%, but after operating losses in the fourth quarter of 2025 and the first quarter of 2026, the second quarter of 2026 returned to profit with revenue of KRW 7.5602tn and operating profit of KRW 113.3bn, while losses attributable to owners occurred in four of the last five quarters.

The bullish case is clear: first-half ESS revenue grew 4.6-fold year on year, lifting its share of company revenue into the high-20% range, and the 46-series backlog expanded above 440GWh.

The bearish case carries equal weight: excluding KRW 241.0bn of tax credits, the second-quarter 2026 operating result was a loss of KRW 127.7bn, and the debt-to-equity ratio climbed to 129.0% in 2025 from 94.7% a year earlier.

The point to watch is therefore not the headline turnaround but when the core business turns profitable excluding subsidies and whether the annual target of more than 90GWh in new ESS orders is filled with actual contracts. This report is for information purposes and contains no buy or sell opinion and no price target.

Sources

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

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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.