[Click eStock] LIG Nex1, Target Price Downgrade Possible but Now a Low Price Buying Opportunity

NH Investment & Securities announced on the 17th that it maintains a Buy rating on LIG Nex1 but lowers the target price from 150,000 KRW to 120,000 KRW. This adjustment reflects a downward revision of this year's estimated operating profit margin from 10% to 8%, considering the increase in low-profit research and development revenue proportion and rising costs (such as facility expansion and test equipment establishment) in preparation for the full-scale domestic and international mass production business. The sales forecast remains unchanged. However, despite the target price downgrade, the Buy rating is maintained as it is viewed as a buying opportunity at a low price from a mid- to long-term perspective. The record-high order backlog is expected to drive mid- to long-term earnings growth, and additional exports are anticipated due to rising global security threats.

Researcher Lee Jaegwang of NH Investment & Securities stated, "LIG Nex1's sales in the first quarter of this year are expected to increase by 14% year-on-year to 487 billion KRW, while operating profit is expected to decrease by 23% to 39 billion KRW." He analyzed, "Due to the nature of the business, earnings forecast visibility is low, but considering that last year's first quarter profitability was influenced by one-off factors such as exchange rate effects and reversal of loss provisions, the decline in operating profit is largely attributable to a base effect."

From a mid- to long-term perspective, now is seen as an opportunity to buy at a low price. Researcher Lee said, "Last year, LIG Nex1 secured large-scale development projects in the domestic market, including the Korean-type long-range artillery missile defense system (LAMD) and long-range air-to-ground missiles, and achieved new orders worth 6.4 trillion KRW, including an export contract for medium-range surface-to-air missiles (M-SAM) to the United Arab Emirates (UAE), resulting in the largest order backlog in history." He added, "Considering this, the mid- to long-term earnings growth trend is expected to continue."

Furthermore, amid escalating tensions due to geopolitical conflicts between countries such as the Russia-Ukraine war and US-China hegemonic competition, the demand for precision-guided munitions is expected to expand significantly. Researcher Lee noted, "It is known that in February, LIG Nex1 signed a memorandum of understanding (MOU) with Romania's state-owned defense company Romarm in the field of surface-to-air missiles." He added, "Since the demand for precision-guided munitions is expected to increase in the future, the possibility of additional overseas orders is also considered very high."