[Click eStock] "LS, Beneficiary of Raw Material Price Increase... Target Price Up 5%"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained its buy rating on LS on the 23rd and raised the target price by 5% from the previous level to 95,000 KRW. This is based on the expectation that the sharp rise in copper prices will significantly improve the first-quarter earnings.

Kiwoom Securities revised upward its first-quarter operating profit estimate for LS from 114.3 billion KRW to 127.9 billion KRW, anticipating a favorable operating environment in the first half of the year due to the sharp rise in copper prices. Currently, copper prices stand at around $8,900 per ton, marking the highest level in nine years. This represents a 58% increase compared to the average in the first quarter of last year.

Researcher Jisan Kim of Kiwoom Securities explained, "The rise in raw material prices is driven by the momentum in the Chinese economy and expectations of additional US stimulus measures," adding, "This will support performance improvements in the LS I&D division, focusing on electric wires and copper smelting sectors." The impact of overseas business disruptions caused by COVID-19, which was a factor in poor performance last quarter, is also observed to be diminishing.

By division, the LS I&D segment is expected to directly reflect inventory valuation gains due to the sharp rise in copper prices. Benefits from the expansion of US infrastructure investment are also anticipated. The joint venture with Furukawa Electric in the electric vehicle market is also gaining traction, with operating profit for this year projected to grow 66% year-on-year to 64.2 billion KRW.

Emtron is operating its production lines at full capacity, supported by strong sales of small and medium-sized tractors in North America and premium injection molding machines. The disposal of its chronically loss-making subsidiary Casco is expected to improve consolidated earnings.

LS Cable Asia is entering a recovery phase alongside the Vietnamese economy, with expectations for expanded performance in submarine cables. Currently, electric wires are improving profitability mainly in general wires due to strong copper prices. With robust orders for submarine and ultra-high voltage cables, the East Sea Plant 2 is expected to enter early full operation. Furthermore, the acquisition of the ultracapacitor business spun off from Emtron is anticipated to create synergy effects in the wind power generation business.

Researcher Jisan Kim said, "Copper smelting fees are expected to be maintained at last year's level this year, and profits from platinum and precious metals will be favorable," adding, "LS Electric is entering a gradual recovery phase along with improved corporate facility investment environments and normalization of overseas exports."