LIG Nex1 Brightens Up with Order Amount Performance Reflected

[Asia Economy Reporter Koo Eun-mo] The stock price of defense contractor LIG Nex1 has been on a continuous upward trend. This is attributed to the fact that projects secured over the past years are now being fully reflected in sales starting this year, raising expectations for improved performance.

According to the Korea Exchange on the 1st, on the 28th of last month, LIG Nex1's stock closed at 35,850 KRW, up 1.56% (550 KRW) from the previous trading day. The stock price of LIG Nex1 has risen for eight consecutive trading days recently, increasing by 37.4% in May alone, far outperforming the KOSPI return of 4.2% during the same period. Extending the period from the March low, the return reaches 116.6%. Institutional investors led the price increase during this period, net buying over 20 billion KRW in the past month.

The recent strong interest from investors is interpreted as a result of the projects secured so far beginning to be reflected in the company’s performance. LIG Nex1’s stock price had been discounted due to slow revenue recognition of secured orders and deteriorating investment sentiment in the defense industry caused by improved inter-Korean relations. For these reasons, sales had continuously declined from 2016 through last year.

Starting from the first quarter, as secured projects began to be recognized as sales, expectations for performance improvement have increased. LIG Nex1’s order backlog has been growing since 2018, reaching 6.2 trillion KRW as of the end of the first quarter this year, which is more than four times last year’s sales (1.4527 trillion KRW). Hwang Eo-yeon, a researcher at Shinhan Financial Investment, forecasted, "Revenue recognition of projects secured from 2018 through last year will accelerate, and as fixed costs decrease relative to increased sales, operating profit growth relative to sales will be significant."

The government’s continued policy of expanding defense spending and the trend of increasing overseas exports are also positive factors for LIG Nex1, a pure defense contractor. Choi Jin-myung, a researcher at NH Investment & Securities, analyzed, "The government’s defense budget is expected to expand at an average annual rate of 9.8% going forward, and recently, the company has succeeded in entering markets targeting military and police forces in Southeast Asia, raising expectations for further expansion." From 2023, new products such as the long-range surface-to-air guided missile (L-SAM) are also scheduled for release, supporting steady growth.

With the recognition of order backlog as sales and positive outlooks for the defense industry combined, this year’s performance is expected to maintain a favorable trend. According to financial information provider FnGuide, LIG Nex1’s sales this year are estimated at 1.6122 trillion KRW, an 11.0% increase compared to the same period last year. Operating profit is also expected to rise 233.6% to 60.4 billion KRW during the same period. Sales for next year and the year after are projected at 1.8431 trillion KRW and 2.0528 trillion KRW, respectively.

This content was produced with the assistance of AI translation services.