[Click e-Stock] "Poongsan Still Relatively Cheap as a Defense Stock"

Effects of 155mm Shell Capacity Expansion
and Potential for Additional Orders

There is analysis suggesting that Poongsan has not yet fully established itself as a major defense stock, which is why its valuation remains relatively low.

On June 24, KB Securities stated that, based on this background, Poongsan still has upward momentum. Over the past five trading days, Poongsan's stock price has risen by approximately 33%. The closing price on the previous day was 1,360,000 KRW, marking an all-time high on a closing basis. While Poongsan had previously been excluded from the rally in defense stocks, it is now moving in line with other major defense stocks.

Previously, Poongsan set its guidance for 155mm artillery shell sales at 250 billion KRW. This figure is considered conservative. This is because demand for 155mm shells is increasing due to heightened geopolitical risks, and the average selling price (ASP) is estimated to be over 5,000 USD. Although there may be differences in export and domestic supply prices for the quantities produced through capacity expansion, the guidance is still seen as conservative when considering the overall market conditions. In addition, since the increase in sales from higher ASP does not affect costs, operating profit is also expected to trend upward.

The possibility of additional orders was also considered. Since Poongsan already has a track record of exporting to various regions such as Saudi Arabia, Israel, and Indonesia, there is analysis that further orders are possible beyond just the second order from Poland.

Choi Yonghyun, a researcher at KB Securities, explained, "Although Poongsan's stock price is at a historical high, it is still trading at a discount compared to not only other defense stocks but also defense component companies. If the impact of the 155mm capacity expansion exceeds expectations and the visibility of additional orders increases, there is still room for further upside even at this point."

On October 2 last year, So and small to medium caliber ammunition from Poongsan was exhibited at the Korea International Defense Industry Exhibition held at Gyeryongdae, Chungnam. Photo by Kang Jinhyung aymsdream@