LG Energy Solution target price raised on ESS despite EV weakness... KT&G set to post record operating profit [Stocktopia]

[Financial News] On the morning of October 15, we bring you a roundup of reports from major securities firms.
LG Energy Solution was seen as capable of outgrowing the industry average on the back of its energy storage system (ESS) business and increased shipments of cylindrical batteries, even if weak EV battery shipments continue.
KT&G was forecast to post record operating profit in the third quarter, fueled by growth in its overseas tobacco business, and analysts said it was an attractive defensive stock amid heightened market uncertainty. GS E&C was expected to regain upward momentum after a first step in its Donghae artificial intelligence (AI) data center project was confirmed.
◆ LG Energy Solution (373220)― Meritz Securities / Analyst Noh Woo-ho
- Target price: 510,000 won (raised 15.9%, from 440,000 won) ᅵ Previous closing price: 422,000 won
- Rating: Buy (maintained)
Meritz Securities raised its target price for LG Energy Solution to 510,000 won, saying the company could outgrow the industry average by leveraging its energy storage system (ESS) business despite weak EV battery shipments. The move reflects higher earnings estimates for this year and next, following provisional third-quarter operating profit that significantly exceeded market expectations. The estimate for next year's operating profit was raised 56.6% from the previous forecast.
Analyst Noh Woo-ho expects the value of an ESS supply chain that excludes Chinese products (Ex-China) to remain intact ahead of the U.S. midterm elections on the 3rd of next month. Noh said, “Regardless of which party gains the upper hand after the U.S. midterm elections, the premium on the U.S. Ex-China ESS supply chain remains valid.” He also expects the per-unit production yield and pack manufacturing bottlenecks that have long challenged the ESS business to ease gradually.
By contrast, he said he did not share the market's hopes for a rebound in battery electric vehicles (BEVs). He expects weak BEV battery shipments to traditional automaker customers to continue amid moves in France and Germany to delay the phaseout of internal combustion engines and the U.S. decision to repeal fuel-economy regulations. He also expects changes to U.S. BEV policy to be delayed until the November 2028 presidential election.
He cited the South Korean government's selection of operators for the third ESS Central Contract Market auction as a potential year-end catalyst for the share price. The market is watching to see whether LG Energy Solution can secure its remaining U.S. ESS orders, but Meritz Securities sees the domestic auction as the year-end catalyst. Noh said the third auction had grown to 1.13 gigawatts (GW), roughly the same size as the combined contracted volume of the first and second rounds, and that confirmed contract wins would provide positive momentum for LG Energy Solution and its related supply chain.
Noh expects the domestic battery industry as a whole to remain in an “L”-shaped cycle, but said LG Energy Solution “can outgrow the industry average as shipments of cylindrical batteries to smart-car maker T increase and the company transforms into more than an ESS manufacturer.” In other words, even while the broader industry remains near the bottom of the cycle, the company can grow faster than the industry average by focusing on ESS and cylindrical batteries.※ Energy storage system (ESS)This is a facility that stores generated electricity in batteries and supplies it when needed. It is used to help balance the output of renewable energy sources such as solar and wind power, whose generation can fluctuate widely. More recently, demand has also grown for stabilizing power supplies to AI data centers.※ ESS Central Contract MarketUnder this system, the government sets the amount of ESS capacity needed to stabilize the power grid, selects operators through competitive bidding, and guarantees revenue through 15-year contracts with the Korea Power Exchange. The first auction was held on Jeju Island in 2023; following the first and second rounds in 2025, the third auction is now underway, with three domestic battery makers competing for contracts.
◆ KT&G (033780)― Korea Investment & Securities / Analyst Choi Go-woon
- Target price: 230,000 won (maintained) ᅵ Previous closing price: 181,800 won
- Rating: Buy (maintained)
Korea Investment & Securities maintained its target price of 230,000 won, expecting KT&G to sustain growth above market expectations in the third quarter and post record operating profit. Third-quarter operating profit was estimated at 515 billion won, up 11% from a year earlier and 4% above the consensus, or average market forecast.
Analyst Choi Go-woon forecast that “growth in the overseas tobacco business, together with domestic cost savings and property sales revenue, will drive the company to record highs in both revenue and operating profit.”
Overseas cigarette sales are expected to rise 10% as both sales volume and selling prices improve. Domestic cigarette sales, by contrast, are forecast to decline 4% as the temporary increase in sales seen in the second quarter fades. The property division is expected to post a temporary, but larger-than-expected, increase in operating profit, reflecting results from new property sales at Mia Station.
Choi highlighted the strength of KT&G's tobacco business. “The global tobacco market is mature and dominated by a small number of major players. KT&G, by contrast, has succeeded in breaking into the space left by the resulting easing of competition,” the analyst said. Choi added, “Given that overseas growth is still at an early stage, investors should focus on fundamental product strength rather than exchange rates.”
Choi added, “It is difficult to find an investment case in the food and beverage sector as compelling as KT&G's right now,” and said, “In an environment of broad market uncertainty like this, I believe it is attractive simply as a comfortable defensive stock.”
◆ GS E&C (006360)― LS Securities Co., Ltd. / Analyst Kim Se-ryeon
- Target price: 50,000 won (maintained) ᅵ Previous closing price: 29,800 won
- Rating: Buy (maintained)
LS Securities Co., Ltd. maintained its Buy rating, target price of 50,000 won and designation of GS E&C as its second-most-preferred stock in the construction sector, saying the company would regain upward momentum as its Donghae artificial intelligence (AI) data center project takes shape this year.
Analyst Kim Se-ryeon said, “According to media reports, the GS Group's Donghae AI data center recently received a building permit for 100 megawatts (MW), suggesting that a construction order could soon become more concrete and work could get underway.” Kim added, “With the first step confirmed for the 1.2-gigawatt (GW) first phase of the Donghae AI data center project, the share price is expected to regain upward momentum.”
The share price has recently been pressured by increased market volatility, but its 12-month forward price-to-book ratio (PBR) of 0.5 times is similar to that of conventional homebuilders, while its return on equity (ROE) in 2027 is forecast at 9.6%. Kim said this meant “the valuation remains highly attractive.”
For next year, the analyst expects operating profit to rise 53% from this year, as revenue growth in the building and housing divisions, supported by the recovery in property sales this year, drives earnings growth. Kim said, “As we confirm both orders and results, we expect a gradual valuation re-rating of the company as an AI infrastructure stock.”

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