[Click eStock] "LS, Stock Price Overly Declined Despite Solid Earnings"

[Asia Economy Reporter Ji-hwan Park] Kiwoom Securities evaluated LS on the 3rd, stating that despite solid earnings, the stock price fell sharply, making its valuation appeal appear greater once again. Following this year's record-high performance, it is expected that operating profit at this year's level can be achieved again next year. The investment opinion 'Buy' was maintained, but the target price was lowered from the previous 95,000 KRW to 80,000 KRW.

Ji-san Kim, a researcher at Kiwoom Securities, said, "Although the target price is adjusted considering the decline in market indicators, it is judged that the drop is excessive compared to the favorable earnings outlook," adding, "While concerns about a price decline remain, having achieved record-high operating profit this year, next year as well, based on strong performance in all cable sectors led by submarine and ultra-high voltage cables and the improved structure of the Mtron division, operating profit at this year's level can be achieved."

By sector, in the case of cables, the trend of profitability enhancement focused on power cables is expected to continue. In particular, submarine cables are analyzed to maintain high growth through strong orders related to offshore wind power and continuous expansion of production lines. Additional orders for submarine cables are expected from Taiwan, the United States, and the Middle East.

Mtron is expected to see positive demand for tractors in North America. Researcher Ji-san Kim said, "Demand for garden maintenance is increasing amid a housing market boom," adding, "Profitability pressures such as raw material prices and logistics costs are gradually easing, and injection molding machines plan to strengthen their North American market presence with premium product lines."

Copper smelting is positive as smelting companies' pricing power over mining companies is strengthening, and smelting fees are expected to turn upward for the first time in seven years. Profits from precious metals such as palladium and gold continue to be strong, and sulfuric acid, which had been in deficit for a long time, turned profitable due to price increases caused by reduced operating rates of Chinese smelters. As a new materials business, plans are in place to expand semiconductor cleaning materials (PSA), solar silver (Ag) paste, and secondary battery material nickel sulfate.

Researcher Kim said, "I&D is highly sensitive to copper prices and earnings, and since it achieved maximum profit this year, a profit decline next year is inevitable," adding, "The coil business aims to expand sales of electric vehicle products through a joint venture with Furukawa Electric, and communication cables are expected to see improved demand conditions following the passage of the US infrastructure bill."

Operating profit for the fourth quarter is expected to be 140.4 billion KRW, a 30% increase year-on-year, continuing the profit growth trend compared to the previous year. Ji-san Kim forecasted, "Seasonally, Mtron, which is in the off-season for tractors, will see a slowdown in performance compared to the previous quarter, but based on still favorable copper prices, the cable, copper smelting, and I&D sectors will achieve solid results."