New Selection on Bond Express: LG Energy Solution 2026 USD Green Bond

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• Recently, Bond Express included a new addition – LGENSO 5.625% 25Sep2026 Corp (USD), which is issued by LG Energy Solution, Ltd. Both the issuer and the bond have a credit rating of BBB+ (S&P).
• This is a green bond, and the funds raised will be used for LG Energy Solution's green projects, such as low-carbon transportation. It's noteworthy that LG Energy Solution issued a green financing framework in February this year, and the ESG management system received the highest rating of SQS1 (Superior) from Moody’s.
• LG Energy Solution (referred to as "LGES") was established in 2020 as a spin-off of LG Chem's battery business. It was listed on the Korea Exchange in 2022 with the stock code 373220.KS, and the current market capitalization is approximately KRW 117 trillion.
• The primary business of LGES is the production of lithium-ion batteries for electric vehicles. As of the first half of this year, LGES is the world's third-largest battery manufacturer for electric vehicles in terms of installed capacity, with a market share of around 14.5%, following CATL and BYD.
• Benefiting from strong global demand for electric vehicles, LGES recorded revenue of KRW  25.6 trillion in 2022, representing a year-on-year growth of 43.0%. The operating profit reached KRW 1.2 trillion, with an increase of approximately 50% compared to the previous year, demonstrating excellent operational performance. In the first half of this year, the company continued its strong performance with revenue and operating profit surging by 86% and 140% year-on-year, respectively.
• Looking ahead, most major economies worldwide are expected to phase out the sale of fossil fuel vehicles after 2030. With a bright outlook for the electric vehicle market, battery manufacturers are poised to benefit, and we believe that LGES's revenue will continue to grow rapidly.
• From the perspective of credit profile, as of June 2023, LGES has a net gearing ratio of 19% and a total debt/EBITDA ratio of 2.4x, suggesting the financial leverage is one of the lowest levels in the industry, and the debt repayment pressure is pretty low.
• Considering the company's promising prospects and the backed by LG Chem, the company has robust financing capabilities, and its liquidity will likely remain decent. In summary, the solvency of LG Energy Solution is expected to be at a decent level in the years ahead.
• Investment-wise, this is a 3-year bond with a yield to maturity of 5.8% as of 2 October 2023, which is pretty high among Korean investment-grade peers. Given its decent credit quality, investors seeking stable income or having ESG preferences can give consideration.