[Click eStock] "LS ELECTRIC, Expected Increase in Sales in Power Infrastructure Sector"

Hana Securities Report

[Asia Economy Reporter Minji Lee] Hana Securities maintained a buy rating and a target price of 77,000 KRW for LS ELECTRIC on the 1st.

In the second quarter, LS ELECTRIC's sales grew 36.6% year-on-year to 878.8 billion KRW. Following the previous quarter, all divisions showed year-on-year growth, driven by a sharp increase in sales in the power infrastructure and renewable energy sectors. Operating profit improved by 27.8% to 60.1 billion KRW during the same period, reflecting increased volume in the power equipment division and the effect of exchange rate appreciation.

Researcher Jaeseon Yoo of Hana Securities stated, "With expected declines in domestic distribution volume in the third quarter and sales decreases in the European and Middle Eastern markets, profit levels in the second half are likely to slow somewhat. However, double-digit high teens profit margins are expected to be maintained."

By business division, the renewable energy sector is expected to significantly reduce its deficit despite decreases in automotive electronics sales and profits, due to the suspension of previously secured solar projects. Researcher Yoo analyzed, "Although there will be a decrease in scale due to delays in some solar project schedules in the second half, the medium- to long-term growth trend remains unchanged."

The power infrastructure division is predicted to achieve further profitability recovery in the second half. Sales to domestic large corporations and overseas battery companies increased, greatly reducing the deficit, and order backlogs also grew significantly in the second quarter.

Researcher Yoo explained, "As global power facility investments increase, the company’s order backlog grew more in the second quarter than in the first. The expected decreases in scale in the power equipment and renewable energy sectors in the second half will be sufficiently offset by growth in power infrastructure sales."

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