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2026 ESS revenue forecast raised by 55%

Maintain TP at W530,000

We maintain our target price of W530,000 for LG Energy Solution (LGES). For the ESS business, we raised our 2026 revenue estimate by 55% to W8.6tr and our operating profit estimate by 53% to W1.8tr. We also revised up our forecast for 2026 North American ESS shipments to 31GWh (from 20GWh), which is higher than our projection for North American EV shipments (26GWh). Reflecting these revisions, we lifted our valuation of LGES’s ESS business from W42tr to W56tr.

The robust ESS outlook is attributable to: 1) front-loaded demand stemming from policy changes; 2) surging ESS demand related to AI data centers; and 3) the ongoing shift away from the Chinese value chain.

Accelerating line conversions to meet rising ESS demand

During its 2Q25 earnings call in July, LGES presented a North American ESS production capacity target of over 30GWh (by end-2026). However, to meet surging downstream demand, it appears that the company is proceeding with additional production line conversions beyond the plan presented in July. We believe additional line conversions are taking place at the Stellantis joint venture, the Lansing plant, and the Honda joint venture. As conversion usually takes six to nine months, we see further upside to our 2026 ESS earnings forecast.

In 2026, we expect the ESS division to deliver revenue of W8.6tr (+157% YoY; +55% vs. our previous forecast) and operating profit of W1.8tr (+566% YoY; +53% vs. our previous forecast). We raised our ESS-related AMPC estimate to W1.4tr (vs. W910bn previously). We estimate the ESS business will account for 30% of total revenue and 51% of total operating profit next year.

Notably, for LGES’s North American lines, we expect ESS battery shipments (31GWh) to exceed EV battery shipments (26GWh) in 2026. Given that ESS batteries command higher prices per kWh, we expect the ESS segment to generate more than double the revenue of EV batteries. Consequently, we expect ESS strength to more than offset the weakness in the EV battery segment, where both shipments (-13% YoY) and AMPC recognition (-19% YoY) are projected to decline.

Overall, expectations for the North American ESS market, a key driver of the battery sector’s rebound in July, remain intact, and we expect upward earnings forecast revisions and order momentum to continue.