[Click eStock] "LIG Nex1, Profitability Improvement Expected from Q2... Target Price Up"

Target Price Raised by 39.3% Compared to Previous Estimate

On the 12th, KB Securities raised the target price for LIG Nex1 from 140,000 KRW to 195,000 KRW, anticipating improved profitability starting from the second quarter of this year. The investment rating was maintained as 'Buy.'

Jung Dong-ik, a researcher at KB Securities, stated, "We have raised LIG Nex1's 12-month target price by 39.3% compared to the previous estimate, reflecting adjustments in earnings forecasts, changes in the applied return on equity (ROE), the 12-month forward period, and changes in the risk-free rate proxy, which is the one-year Treasury bond rate, as well as beta changes." He added, "Despite the recent sharp rise in the stock price, the upward revision of the target price secures a 17.3% upside potential compared to the closing price on the 11th, so we maintain the 'Buy' rating."

LIG Nex1's stock price has surged significantly recently due to foreign buying. Researcher Jung analyzed, "Since the last target price revision on February 7, LIG Nex1's stock price has risen by 46.6%, far exceeding the KOSPI's 3.7% increase during the same period. Fundamentally, this is due to improved performance from large orders last year and expectations for additional orders, but from a supply-demand perspective, the influx of foreign buying has had a major impact." He added, "The foreign ownership, which was only 11.42% on February 7, has increased to 19.94%, supported by large purchases from the Singapore government and the Government of Singapore Investment Corporation (GIC)."

LIG Nex1's first-quarter earnings are expected to fall short of market expectations, but profitability is projected to improve from the second quarter onward. Researcher Jung explained, "First-quarter sales are expected to increase by 44.6% year-on-year to 790.5 billion KRW, while operating profit is expected to decrease by 31.4% to 46.8 billion KRW. Sales will slightly exceed consensus (average securities firm forecasts), but operating profit will fall short of market expectations by more than 20%. Approximately 280 billion KRW in Indonesian walkie-talkie sales, which should have been recognized last year, were deferred to this year, causing a significant year-on-year increase in sales. However, the operating profit margin is very low at 2-3%, so it did not contribute much to operating profit. Profitability is expected to improve from the second quarter due to the absence of this business segment."

There is an expectation of additional R&D personnel recruitment due to the acquisition of a large site. LIG Nex1 announced on the 2nd that it plans to acquire land and buildings of the Sejong Research Center located in Seongnam City by investing 300 billion KRW. Researcher Jung said, "R&D personnel have increased by nearly 1,000 over the past two years, and additional hiring is necessary due to large orders and increased development sales last year. Securing a large site near Pangyo will contribute to the recruitment of additional R&D personnel."