LG Energy Solution (LGES) shares climbed 6.4% to 416,000 won on Thursday, reaching a near four-month high, after the battery maker reported third-quarter results that showed growth outside the electric-vehicle (EV) market. The company posted preliminary operating profit of 756 billion won and revenue of 9.64 trillion won, with strong energy-storage system (ESS) shipments in North America, improved European plant utilization, and US manufacturing incentives contributing to the performance.
The earnings beat was more substantial than the headline suggests. Operating profit rose 25.7% year-over-year and 567.3% sequentially, while revenue increased 59%. The 756 billion won profit was more than double the 365.5 billion won consensus estimate cited by Investing.com. Notably, US Advanced Manufacturing Production Credits contributed 416.9 billion won, but even excluding those incentives, LGES generated 339.1 billion won of operating profit, reversing an underlying loss of 127.7 billion won in the second quarter. This indicates the improvement was not solely a subsidy story.
LGES attributed the gains to stronger North American ESS shipments, which reduced fixed-cost pressure, and increased European sales of mid- and lower-priced EV pouch batteries, which improved plant utilization. Production also resumed at its General Motors joint venture, while its Hyundai Motor joint venture began operations. Shinhan Investment Securities analyst Lee Jin-myung noted, according to Edaily, that “in the short term, ESS and cylindrical batteries are supporting earnings.” Shinhan maintained a Buy rating and a 500,000 won target price.
Energy storage fills the gap left by slower EV growth
The main shift in LGES’s earnings mix is coming from energy storage. Shinhan expects North American ESS production capacity to exceed 50 GWh by year-end as bottlenecks ease, giving LGES a second growth engine while passenger-EV demand remains uneven. The company is benefiting from grid-scale battery demand as utilities and data-center operators invest in power infrastructure, with AI data centers increasing electricity consumption and driving greater storage demand.
The EV business is not disappearing. Higher European mid-nickel volumes, GM joint-venture production, and the Hyundai ramp are helping stabilize utilization. But ESS is increasingly absorbing factory capacity that might otherwise sit underused. LGES also announced a four-year agreement for 240,000 tonnes of Canadian lithium concentrate, strengthening its North American supply chain across EV and storage markets.
This shift means investors are starting to value LGES less as a pure EV story and more as a broader battery infrastructure company. The rally still leaves LGES below several broker targets. Shinhan’s 500,000 won target implies upside, while DB Securities maintained a Buy rating and a 570,000 won target. DB analyst Ahn Hoe-soo argued that LGES’s early US ESS expansion and system-integration capabilities position it well as America emphasizes grid security and domestic supply chains.
Next test is whether ESS can support a higher valuation
The risk is that tax credits still account for more than half of reported operating profit, while ESS production is ramping and the EV slowdown has not ended. Analysts see part of the quarterly profit boost coming from compensation paid by a North American automaker that failed to meet purchase commitments, meaning some improvement may not repeat. Investors need to watch subsidy-independent profitability rather than the headline number alone.
LG Energy Solution’s four-month high does not mean EV demand has recovered. It means the company has shown it can improve earnings without waiting for that recovery.
This article is for informational purposes only and does not constitute financial advice.
