[Click eStock] "LS Jeonseon Asia, Beneficiary of Expanded Construction and Infrastructure Investment in Vietnam"

Kiwoom Securities Report
Coverage Initiated, Target Price 10,500 Won

[Asia Economy Reporter Minji Lee] Kiwoom Securities initiated coverage on LS Cable Asia on the 21st, issuing a buy rating and a target price of 10,500 KRW. This is because the expansion of construction and infrastructure investment in Vietnam is expected to concentrate benefits on LS Cable Asia, the leading power and communication cable company.

The investment point of LS Cable Asia lies in the expansion of construction and infrastructure investment amid Vietnam's urbanization and industrialization trends. Vietnam's urbanization rate, which was only about 22% in 2000, is expected to exceed 50% by 2025. Large-scale urban infrastructure design and smart city development are planned, with power energy investment required amounting to 150 billion USD by 2030. The global trend of companies relocating manufacturing bases from China to Vietnam due to US-China tensions is also expected to have a positive impact.

The company is also positively positioned as it is advancing the sophistication of its core business areas such as medium and high voltage (MV, HV) power lines, bus ducts, and optical cables, which could improve profitability. Ji-san Kim, a researcher at Kiwoom Securities, said, "There is an increasing need for undergrounding overhead power lines in the power sector," adding, "With the rise of smart buildings and super high-rise buildings, demand for power lines and bus ducts is increasing, and investments in communication lines such as optical cables and UTP to expand communication infrastructure will also grow."

Furthermore, it is expected to strengthen its leading position in the Southeast Asian power cable market, leveraging the stabilization of the Myanmar subsidiary's performance. The Myanmar subsidiary, which began operations at the end of 2018, is expected to turn profitable next year.

In the third quarter, the company's sales are estimated at 148.2 billion KRW and operating profit at 4.9 billion KRW, increasing by 10% and 792% respectively compared to the previous quarter. The company is recovering from the impact of the Vietnamese government's national lockdown due to COVID-19, and with consecutive large orders, the power sector's order backlog increased by 70% quarter-on-quarter to 120 billion KRW. The rise in copper prices is also positive for earnings forecasts.

Researcher Ji-san Kim stated, "LS Cable Asia is Vietnam's number one power and communication cable company," and added, "The favorable business environment due to Vietnam's high economic growth is continuing, and steady expansion of production capacity for core products is underway, leading to stable earnings growth."