[Click eStock] “LIG Nex1, Growth Secured by Blue-Chip Stock”

Order Backlog Increasing for 4 Consecutive Years... Defensive Role Amid Omicron Spread
Shinhan Financial Investment "LIG Nex1 Target Price Raised from 75,000 KRW to 78,000 KRW"

LIG Nex1 Cheongung

[Asia Economy Reporter Gong Byung-sun] LIG Nex1 is expected to post fourth-quarter earnings this year that meet market consensus. Strong order intake, with order backlog increasing for four consecutive years, is expected to serve as a growth driver.

On the 1st, Shinhan Financial Investment estimated LIG Nex1's Q4 sales at 576.4 billion KRW, up 18.4% year-on-year, and operating profit at 29.1 billion KRW, up 39% over the same period. Despite the fact that sales from the Indonesian radio business were not reflected in the Q4 results, sales were 2.17% below consensus, while operating profit exceeded consensus by 2.83%.

Orders have been steadily increasing. This year's order backlog is expected to reach 8 trillion KRW, up 10.2% from the previous year. This marks the fourth consecutive year of increasing order backlog. Due to the seasonal nature of defense projects, orders tend to concentrate in Q4, with expected Q4 orders amounting to 1.9 trillion KRW. Next year, domestic projects alone are expected to achieve orders between 2.2 trillion and 2.5 trillion KRW. The growth in orders is expected to continue serving as a growth engine through 2024.

Hwang Eo-yeon, a researcher at Shinhan Financial Investment, said, "There is mention of a 4 trillion KRW-scale order for the Cheongung PIP for the United Arab Emirates (UAE)," adding, "If overseas business orders are secured, further upward revisions of estimates are possible."

Accordingly, operating profit is predicted to grow 66.6% this year compared to last year, and 22.5% next year. Additionally, as sales increase, the proportion of fixed costs this year is expected to decrease by 2.2 percentage points compared to the previous year. Overseas projects ordered in 2018 and 2023 will be reflected in sales next year.

Therefore, Shinhan Financial Investment maintained its "Buy" rating on LIG Nex1. The target price was raised from 75,000 KRW to 78,000 KRW. The closing price on the previous day was 53,700 KRW. Researcher Hwang explained, "Concerns about delayed economic recovery due to Omicron are growing," adding, "It is a traditional defensive stock and its earnings growth is secured based on the order backlog."