[Click eStock] "LS, Profit Contribution from 'LS I&D' Rises with Copper Price Increase"

Target Price Raised to 155,000 Won

On the 22nd, Samsung Securities raised the target price of LS, the holding company of LS Group, to 155,000 KRW. This is based on the analysis that the profit improvement trend of its subsidiary LS I&D, the No.1 American wire and cable company, will accelerate due to rising copper prices and the expansion of the US telecommunications cable market.

Yang Il-woo, head of Samsung Securities' ESG (Environmental, Social, and Governance) team, stated in a report on the same day, "LS I&D's total sales consist of 70% wire and cable and 30% telecommunications cable," adding, "If the average copper price rises by 1 dollar per ton, quarterly sales increase by 70,000 dollars, and operating profit rises by 11,600 dollars."

He explained, "Since 2021, LS I&D has had lower operating profits relative to sales, which is likely due to the increased proportion of the relatively less profitable electric vehicle-related wire and cable business," and forecasted, "Since the wire and cable business has recorded profits since the third quarter of last year, the profit increase from sales growth will become larger."

Yang predicted, "With the US Department of Commerce launching the BEAD (Broadband Equity Access and Development) program to build broadband service infrastructure, the profitability of LS I&D's telecommunications cable business will also improve." BEAD is a project that provides a total of 42.5 billion dollars (approximately 57 trillion KRW) in subsidies by 2030 to telecommunications companies investing in areas with outdated networks, small towns, and places with replacement demand.

He noted, "In May last year, LS I&D sold a 19.9% stake in its telecommunications cable division through a pre-IPO (pre-listing equity investment) for 150 million dollars, recognizing the division's corporate value at about 1 trillion KRW," and evaluated, "It is expected to proceed with an IPO in about 3 to 5 years, which could lead to a high corporate valuation."

He continued, "Structural earnings growth is expected for LS and its major subsidiaries, including LS I&D," and stated, "Applying a 15x price-to-earnings ratio (P/E), which is a 10% discount from the average P/E of six competitors, we raise the target price by 19% to 155,000 KRW and maintain a 'Buy' investment rating."