LG Energy Solution Q1 profit more than doubles on U.S. gains

On Wednesday, LG Energy Solution (373220.KS) reported a more than doubling of quarterly earnings due to U.S. Inflation Reduction Act subsidies and strong electric vehicle sales.

Earnings beat expectations, boosting its stock.

Since the U.S. law took effect, the company, which supplies Tesla Inc (TSLA.O), General Motors Co (GM.N), and others, has received requests from big automobile clients to increase battery supply, which might lead to more orders.

LG Energy Solution (LGES) reported a January-March operational profit of 633 billion won ($472.6 million), up 145% from 259 billion won.

The average Refinitiv SmartEstimate analyst projection was 633 billion won.

Analysts ascribed the earnings increase to strong EV sales in the US, where the Inflation Reduction Act offers EV buyers a $7,500 tax credit.

LGES Chief Financial Officer Lee Chang-sil said the business would remain competitive in the U.S. despite Chinese battery companies’ efforts to enter the market.

He attributed that advantage to the Inflation Reduction Act, which aims to wean the US off Chinese EV battery components.

U.S. senators want to limit tax incentives for Chinese-made EV batteries, targeting Ford Motor Co (F.N) and CATL (300750.SZ).

LG Energy Solution’s quarterly revenue rose to 8.7 trillion won. Despite metal prices, it predicted stable second-quarter sales revenue.

LGES said reduced metals input prices could lower revenue in the second half of the year due to “cost pass-through” arrangements with customers, but profitability would be constrained.

Korea Investment & Securities found that LGES, Samsung SDI Co Ltd (006400.KS), and SK On batteries power 80% of U.S. tax credit-eligible EVs.

LG Energy Solution (LGES), split out of LG Chem Ltd (051910.KS) last year, climbed 2.4% in morning trade, outperforming a flat KOSPI market (.KS11).