Hello, this is Daily Stock.
Today, we will take an in-depth look at the shipment guidance and future growth scenarios of LG Energy Solution, a leading Korean large-cap battery player that is seeking breakthroughs through portfolio diversification amid the recent temporary slowdown in electric vehicle (EV) demand.
[Image: /stdaily/uploads/202608/gen_6a8bec5d34d626.86512230.png]
Key Summary
- **Shipment Guidance Adjustment**: LG Energy Solution maintained its annual revenue growth target of mid-10% to 20% year-on-year, but announced a reduction in capital expenditure (CAPEX) of over 40% year-on-year to pace its expansion.
- **Structural Growth of ESS**: To overcome the EV chasm, the company is actively targeting the energy storage system (ESS) market, centered on the North American power grid, and has raised its North American ESS production capacity target from 30GWh to over 50GWh by the end of 2026.
- **Portfolio Realignment**: The company is laying the groundwork for a performance recovery in the second half of the year through the full-scale shipment of next-generation 46-series cylindrical batteries and the diversification of its mid- to low-priced product lines, such as high-voltage mid-nickel and LFP batteries.
Current Market Situation
On August 24, 2026, the KOSPI market closed at 6,696.96, showing a sharp decline early in the week alongside corrections in large semiconductor stocks.
Despite the sharp drop in the index, large-cap secondary battery stocks held up relatively well, and LG Energy Solution (373220) closed at 362,000 KRW, up 18,500 KRW (+5.39%) from the previous day, showing strength in a falling market.
According to Daily Stock's proprietary Fear & Greed Index, the KOSPI Fear & Greed Index stood at 49.6 (Neutral), continuing a balanced wait-and-see stance following last week's neutral level (50.9).
The Nasdaq Fear & Greed Index was also recorded at 55.2 (Neutral), indicating that the global financial market is searching for direction amid macro indicators and policy uncertainties.
Recently, the USD/KRW exchange rate fell slightly to 1,381.50 KRW per dollar, somewhat slowing down the short-term currency gain momentum for export companies compared to the previous quarter.
Nevertheless, for LG Energy Solution, market confidence in achieving its guidance is gradually being restored as operating rates at its local North American factories recover and large-scale power grid ESS orders continue, mainly in the eastern region.
Financial Analysis
LG Energy Solution's consolidated financial results for the second quarter of 2026 recorded revenue of 7.5602 trillion KRW, an increase of 24.8% year-on-year and 15.3% quarter-on-quarter.
During the same period, operating profit recorded 113.3 billion KRW, a 77.0% decrease year-on-year, but successfully turned profitable after two quarters since the operating loss of 207.8 billion KRW in the first quarter.
The key factor for the return to profitability in the second quarter was the full reflection of 241 billion KRW in benefits from the North American Advanced Manufacturing Production Credit (AMPC), along with a gradual recovery in operating rates in the European region.
In particular, the ESS business unit continues its high-growth trend, securing more than 3 trillion KRW in new orders in the first half of the year alone, driven by demand for power infrastructure in AI data centers.
Below is a summary of recent quarterly financial performances and forecasts for 2026.
| Classification | Q1 2026 (Confirmed) | Q2 2026 (Confirmed) | Q3 2026 (Forecast) | Full Year 2026 (Estimate) |
|---|---|---|---|---|
| **Revenue** | 6.5550 trillion KRW | 7.5602 trillion KRW | 9.0470 trillion KRW | 32.2971 trillion KRW |
| **Operating Profit** | -207.8 billion KRW (Loss) | 113.3 billion KRW | 293.0 billion KRW | 607.6 billion KRW |
| **AMPC Benefits** | 189.8 billion KRW | 241.0 billion KRW | 386.0 billion KRW (Est.) | Approx. 1.1 trillion KRW |
| **Key Drivers** | Small battery shipments | ESS & cylindrical shipments | GM JV Line 1 restart effect | ESS Capa exceeding 50GWh |
Valuation
Based on the current stock price of 362,000 KRW, LG Energy Solution's market capitalization is approximately 84.7080 trillion KRW, ranking 7th in the KOSPI market.
It has undergone a downward correction of about 35% from its peak of 558,000 KRW over the past three years, indicating that from a large-cap perspective, its valuation is becoming attractive at historical lows.
According to major research institutions such as Kiwoom Securities, the price-to-earnings ratio (PER) calculated with the 2026 expected earnings per share (EPS) of 506 KRW remains high, continuing valuation debates.
However, this is a temporary distortion of performance reflecting the suspension of some Ultium Cells lines and the effects of the EV chasm through the first half of 2026.
If the valuation is based on the projected 2027 operating profit of 4.6697 trillion KRW, when global ESS market preemption effects and the 46-series cylindrical battery shipments are fully realized, the PER is projected to drop significantly to approximately 43.0x.
[Image: /stdaily/uploads/202608/gen_6a8bec6c352ee3.85227871.png]
Expert and Institutional Analysis
Following the second-quarter earnings release, securities analysts are adjusting short-term expectations for LG Energy Solution while focusing on the rebalancing toward the ESS sector in the second half.
KB Securities analyzed that with the surge in AI data center investments by US big tech companies, ESS is rapidly emerging as the only alternative to solve electricity shortages.
Accordingly, a scenario is proposed where ESS shipments in the US business segment could outpace EV battery shipments for the first time in history in 2026.
IBK Securities highly evaluated the company's feasibility in meeting its 2026 management guidance (revenue growth rate of 15-20%, operating profit margin in the mid-single digits).
This is because the restart of the GM Ultium JV Line 1 plant and concrete mass-production schedules for the 46-series at the Ochang and Arizona plants in the second half are expected to drive shipment recovery.
However, a cautious view was also presented, noting that initial ramp-up costs from the concurrent expansion of new production sites could act as a source of margin volatility in the third quarter.
Risk Factors
- **Order Volatility from Global OEMs**: There are ongoing concerns about guidance rollbacks due to delayed lineup transitions by automakers, as seen in the recent large-scale contract cancellation following Ford's adjustment of its European EV strategy.
- **Initial Plant Startup Cost Burden**: Fixed costs and high initial defect rates associated with starting up large-scale new lines, such as the Michigan and Arizona plants in the US, could put pressure on short-term operating margins.
- **Political and Institutional Variables**: There is macro risk that the AMPC subsidy, a benefit of the US Inflation Reduction Act (IRA), could fluctuate significantly depending on changes in global tariff policies and election outcomes.
Investment Outlook Summary
LG Energy Solution is swiftly restructuring its business portfolio, which was previously heavily weighted toward EV batteries, toward ESS for AI data centers and mid- to low-end LFP and mid-nickel lineups.
In the short term, it is passing through a tunnel of adjusted shipment guidance due to the EV chasm and low operating rates in European plants. However, the decision to safeguard financial health by adjusting the pace of CAPEX is viewed positively.
Consequently, for medium- to long-term investors, a strategy of tracking the visibility of ESS orders in the second half of 2026 and the yield stabilization of 46-series mass production on a quarterly basis is recommended.
While monitoring the direction of global interest rates and the USD/KRW exchange rate, it may be reasonable to consider installment-purchase scenarios near the stock's long-term support level of 320,000 KRW to 340,000 KRW.
FAQ
Q1. What are the key details of LG Energy Solution's annual shipment guidance for 2026?
A1. The company has presented guidance to grow its annual revenue in 2026 by mid-10% to 20% year-on-year. Additionally, rather than pursuing aggressive capacity expansion, it is reducing its capital expenditure (CAPEX) by over 40% year-on-year to focus on internal stability.
Q2. Can the ESS business serve as an alternative during the EV chasm?
A2. Yes, it can. As electricity grid infrastructure faces shortages due to the surge in AI data center investments by US big tech firms, the demand for energy storage systems (ESS) is exploding. LG Energy Solution has responded by significantly raising its North American ESS production capacity target to over 50GWh by the end of 2026.
Q3. What is behind the return to profitability in the second quarter, and what is the impact of the AMPC?
A3. Operating profit for the second quarter of 2026 turned profitable at 113.3 billion KRW. This reflected 241 billion KRW in benefits from the US Advanced Manufacturing Production Credit (AMPC), and was supported by a recovery in European operating rates and an improved cylindrical mix.
Q4. Is the recent cancellation of global supply contracts a serious risk?
A4. The stock experienced a correction following news of contract cancellations with some commercial vehicle customers, including Ford. However, experts believe key EV contracts with non-JV clients such as Rivian, Mercedes-Benz, and Renault remain robust, suggesting the impact is likely to be temporary.
Q5. What future schedules and variables should investors focus on?
A5. Key variables include the operating rate trend of the GM Ultium JV Line 1 plant, which restarts after mid-August, and the success of mass-producing the next-generation '46-series' at the Ochang and Arizona plants scheduled for the second half of the year.