[Click eStock] "LIG Nex1, Profitability Improvement Expected... Coverage Resumed"

Yuanta Securities resumed coverage on LIG Nex1 on the 12th, stating that although the company posted below-expectation results for the third quarter, profitability is expected to improve soon, with a target price of 340,000 KRW and a 'Buy' investment rating.

Researcher Lee Seung-woong said, "Consolidated sales in 2025 are expected to increase by 24.6% year-on-year to 3.6 trillion KRW, and operating profit is forecasted to rise by 43.2% to 352.8 billion KRW, indicating significant growth in scale and profitability improvement."

He added, "Sales recognition will accelerate as mass production projects for Cheongung-II for the United Arab Emirates (UAE) in 2025 and Saudi Arabia in 2026 commence," and noted, "Expectations remain strong for overseas guided weapon orders from the United States (Bigung), Romania (Singung), and Malaysia (Haegung)."

The third-quarter results this year fell short of market expectations. Researcher Lee said, "Third-quarter consolidated sales increased by 38.1% year-on-year to 740.3 billion KRW, and operating profit rose by 26.5% to 51.9 billion KRW, missing the market consensus of 724.2 billion KRW and 61.3 billion KRW, respectively."

He explained, "Operating profit underperformance is attributed to 40 billion KRW in sales of low-profit Indonesian walkie-talkies and increased expenses such as the acquisition of Sejong Research Institute."

In terms of scale, all sectors grew evenly based on mass production projects. Specifically, sales in the precision strike division increased by 15.3% year-on-year to 314.2 billion KRW due to mass production of Hyeongung, Haegung, and Jung-eo-rye-Ⅱ. The command and control division recorded sales of 198.2 billion KRW, up 76.5%. Sales in the surveillance, reconnaissance, and air/electronic warfare divisions also rose to 119.3 billion KRW and 90.2 billion KRW, respectively.