[Click eStock] "LIG Nex1, Steady Start and Growing Future"

Hi Investment & Securities "Maintain LIG Nex1 Target Price at 60,000 Won"
Hyunggu 3rd Batch Production and Transition to Cheongung PIP Expected to Drive Sales Growth

[Asia Economy Reporter Gong Byung-sun] LIG Nex1 posted solid results in the first quarter of this year, and an analysis suggests that its growth will accelerate going forward. LIG Nex1 expects export mass production to begin in earnest from the middle of next year. Accordingly, Hi Investment & Securities maintained a target price of 60,000 KRW and a 'Buy' rating on LIG Nex1.

According to Hi Investment & Securities on the 18th, LIG Nex1 recorded steady results in the first quarter. Sales in the first quarter were 350.5 billion KRW, unchanged from the same period last year. Although annual sales this year are expected to increase from 1.6 trillion KRW to 1.8 trillion KRW due to the Cheongung performance improvement project (PIP) and the third mass production of Hyeongung, the figure is somewhat disappointing. Operating profit was 12.8 billion KRW, down 52% from the same period last year, and fell short of the market consensus of 18.4 billion KRW. Kwang-sik Choi, a researcher at Hi Investment & Securities, explained, “Although operating performance appears weak compared to consensus, it is reasonable considering the base effect from exchange rates in the first quarter of last year.”

Second-quarter results are also expected to be favorable. The sluggish sales in the first quarter are anticipated to improve due to the third mass production of Hyeongung and the transition to Cheongung PIP, leading to sales growth and fixed cost improvement effects. The export ratio steadily declined from 17% in the first quarter of last year to 5% in the fourth quarter due to the impact of COVID-19, but slightly rebounded to 8% in the first quarter of this year. Researcher Choi said, “The export ratio for the remaining three quarters is expected to exceed 15%, which is favorable,” adding, “Both the top line and product mix will improve from the second quarter.”

Export mass production is expected to begin in earnest from the middle of next year. Due to exports, the order backlog increased by 800 billion KRW compared to the same period last year, reaching 7 trillion KRW. Orders this year are expected to be around 2.7 trillion KRW, similar to last year, and the year-end backlog is projected to reach 7.9 trillion KRW. Although 45% of the backlog is export orders, the export ratio in last year’s sales was 10%, down 3 percentage points from the previous year. Researcher Choi said, “The decrease in exports last year was due to increased demands from clients for quality and localization,” and added, “LIG Nex1 has informed that export mass production will begin in earnest from the middle of next year.” Although it is an old momentum, if the plan proceeds as expected, steep performance growth is anticipated next year.