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Tesla resumes battery purchases

Lower TP to W500,000

We revise down our 2024F EBITDA by 13% and significantly lower our 1H24 earnings estimates for LG Energy Solution (LGES). However, we believe earnings will bottom out in 1Q24. We recommend gradually accumulating shares from February.

Conditions to improve markedly in 2H24; ASP to stabilize and shipments to recover from 2Q24

We forecast LGES to deliver significantly improved earnings in 2H24, with revenue of W22tr (vs. W14tr in 1H24) and operating profit of W3.1tr (vs. W406.5bn in 1H24). Our 2024 estimates factor in advanced manufacturing production credit (AMPC) recognition of W1.9tr.

1Q24 forecast: Demand to vary by customer; only Tesla-bound shipments to recover meaningfully

In 1Q24, we forecast small-sized battery shipments to jump 40% QoQ and electric vehicle (EV) battery shipments to slump 20% QoQ.