LG Energy Solution flags 26% rise in Q3 operating profit

On Thursday, LG Energy Solution shares reached a near 4-month high following an earnings report that surpassed forecasts, driven by U.S. incentives and a surge in demand for energy-storage systems. The company's shares increased by 4.09% to 407,000 won, marking the highest level since June 18, amidst a 0.6% decline in the broader KOSPI index.

Operating profit for the three months ending September 30 stood at 756 billion won, more than double the 365.5 billion won consensus estimate, indicating a 107% increase over expectations. Revenue is anticipated to rise by 59% to 9.6 trillion won, as per the company's regulatory filing. The preliminary earnings were supported by U.S. production tax credits, coupled with incentives for American-made electric-vehicle batteries, a restart of production at North American joint-venture facilities, and a rise in EV shipments to Europe.

LG Energy Solution is intensifying its U.S. production to capitalize on the Advanced Manufacturing Production Credit while reallocating capacity towards energy-storage systems as demand for its EV batteries softens. The company serves major automakers such as Tesla, General Motors, and Hyundai Motor, facing a prolonged slowdown in EV demand.

LG Energy Solution is shifting focus towards energy-storage systems, crucial due to the burgeoning electricity requirements from artificial-intelligence data centers. The earnings guidance factors in the impact of U.S. production tax credits; excluding those, operating profit would have been 339.1 billion won, highlighting the extent to which incentives bolstered reported profitability. LG Energy Solution is set to unveil its comprehensive third-quarter results on November 3.