[Click eStock] "LS ELECTRIC, Expected to Benefit from Expanded Semiconductor and Battery Investments"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating and a target price of 80,000 KRW for LS ELECTRIC on the 22nd. This is based on the expectation that the company will record earnings in line with market forecasts for the fourth quarter, along with continued benefits from expanded investments in semiconductors and batteries.

The estimated operating profit for LS ELECTRIC in the fourth quarter is 47.5 billion KRW, representing a 46% growth compared to the same period last year. The previously underperforming power infrastructure and renewable energy divisions are expected to turn profitable and show significant improvement. Ji-san Kim, a researcher at Kiwoom Securities, stated, “We expect the benefits from expanded capital investments focused on the semiconductor and battery sectors to continue next year as well,” adding, “The stock price decline is excessive compared to the favorable earnings outlook.”

By segment, power equipment exports are performing well. While demand for renewable energy in Europe continues to increase, Southeast Asia is seen as emerging from the downturn caused by COVID-19. Although rising raw material prices have increased cost pressures, it is analyzed that these can be passed on to sales prices. The power infrastructure division has secured order backlogs mainly from data centers and the battery sector. LS ELECTRIC is leading the domestic data center distribution panel market and is expected to participate actively as the three major battery companies expand their overseas factories in Europe and North America.

The automation solutions division is showing the strongest momentum. It is strengthening its position in the large enterprise market by replacing Japanese products and is expected to continue growth centered on unit machinery, battery, and automotive sectors.

Among the renewable energy divisions, solar power is expected to secure orders for similar large-scale projects based on references such as the Imjado project. Although the ESS domestic market is sluggish, demand for power system stabilization to improve the power quality of renewable energy is expected to increase. Among other subsidiaries, LS Mecapion, which produces automation servo motors, is expected to continue strong performance, and demand in the semiconductor sector is also showing strength.

Operating profit for next year is forecasted at 181.4 billion KRW, a 15% increase compared to this year. Researcher Ji-san Kim analyzed, “The company faces the challenge of securing new growth drivers, improving its structure focusing on high-profit businesses, and expanding overseas market performance,” adding, “Attention should be paid to new green business ventures such as hydrogen fuel cell power EPC, as well as the expansion of smart grid, electric vehicle, and battery-related businesses.”