[Click eStock] Daishin "LIG Nex1, Expanding Domestic and Overseas Orders"…Target Price Up

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 28th that it raised the target price of LIG Nex1 to 86,000 KRW by applying a target price-to-earnings ratio (PER) to the estimated earnings per share (EPS) of 4,493 KRW for next year, maintaining a buy investment opinion. The target PER was applied based on the average of 2016, a past growth period, and last year, a stable period.

LIG Nex1 is expected to record sales of 580.1 billion KRW in the fourth quarter of this year, a 19% increase compared to the same period last year, and operating profit of 23.3 billion KRW, an 11% increase. Sales are 1% lower and operating profit is 12% below market expectations. Sales are expected to increase by 16% year-on-year with a third-quarter order backlog of 6.7 trillion KRW. Operating profit is expected to improve due to a decrease in planned costs for some projects and a reduction in fixed costs resulting from increased sales.

Lee Dong-heon, a researcher at Daishin Securities, said, "The company announced the completion of negotiations related to overseas orders for the domestically produced missile Cheongung-II (M-SAM), and the contract is presumed to be imminent. Domestic orders of 1.4 trillion KRW were also announced this year, and excluding Cheongung-II, orders of around 2 trillion KRW are expected both domestically and internationally." He added, "Including Cheongung-II orders, at least 4 trillion KRW in orders have been secured, and the year-end order backlog exceeds 9 trillion KRW."

He continued, "The company grew based on overseas orders in 2015, with an average PER of 27 times in 2016 (peak 37 times, market capitalization of 2.8 trillion KRW). This year's order backlog is at least 7.7 trillion KRW, exceeding 2015's 5.7 trillion KRW by 36%. With the expansion of domestic and international order pools and the full-scale start of exports, considering the increased competitiveness and lowered valuation compared to 2015, we recommend it as the top pick among mechanical defense stocks."

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