[Click eStock] "LS Electric, Underperforming Order Business... Expected Improvement in Q4"

Strong Performance Expected in Device Business Sector in Q3 This Year
Kiwoom Securities Maintains LS Electric Target Price at 80,000 Won

[Asia Economy Reporter Gong Byung-sun] LS ELECTRIC's third-quarter performance this year is expected to fall slightly short of market consensus due to sluggish orders business despite strong performance in the device business segment. However, the orders business segment is anticipated to grow in the fourth quarter.

On the 21st, Kiwoom Securities estimated LS ELECTRIC's third-quarter sales at 647.1 billion KRW, up 6.84% year-on-year, and operating profit at 43.8 billion KRW, a 101% increase over the same period. These figures are 2.07% and 7.4% below the consensus of 660.8 billion KRW and 47.3 billion KRW, respectively.

The device business segment, including power equipment and automation solutions, appeared strong in the third quarter. In the power equipment sector, renewable energy demand along with exports to Europe and the United States positively influenced results. For automation solutions, factory automation investment demand has increased following COVID-19, and LS ELECTRIC's position is strengthening in the large enterprise market by replacing Japanese products. However, the profitability of the orders business in power infrastructure and renewable energy showed little improvement and is expected to negatively impact earnings.

(Provided by Kiwoom Securities)

The orders business segment, including power infrastructure and renewable energy, which showed insufficient improvement, is expected to return to profitability in the fourth quarter. In power infrastructure, sales to Korea Electric Power Corporation, battery industries, and data centers are expected to increase, supporting seasonality. Additionally, the renewable energy division is expected to perform steadily with concentrated sales from solar projects and strong demand for electric vehicle parts.

Kim Ji-san, a researcher at Kiwoom Securities, said, “Automotive parts centered on core components such as EV relays used in electric vehicles, chargers, and solar inverters are expected to achieve 38% high growth in sales this year,” adding, “It is necessary to pay attention to the potential entry into new green businesses such as fuel cell power EPC (engineering, procurement, and construction) and the order momentum for large-scale offshore and onshore solar projects.”

Accordingly, Kiwoom Securities maintained its investment opinion of ‘Buy’ on LS ELECTRIC with a target price of 80,000 KRW. The closing price on the previous day was 64,900 KRW.