[Click eStock] LIG Nex1, Target Price Downgrade Possible but Now a Low Price Buying Opportunity

NH Investment & Securities announced on the 17th that it maintains a Buy rating on LIG Nex1 but lowers the target price from 150,000 KRW to 120,000 KRW. This adjustment reflects a downward revision of this year's estimated operating profit margin from 10% to 8%, considering the increase in low-profit research and development revenue proportion and rising costs (such as facility expansion and test equipment establishment) in preparation for the full-scale domestic and international mass production business. The sales forecast remains unchanged. However, despite the target price downgrade, the Buy rating is maintained as it is viewed as a buying opportunity at a low price from a mid- to long-term perspective. The record-high order backlog is expected to drive mid- to long-term earnings growth, and additional exports are anticipated due to rising global security threats.

Researcher Lee Jaegwang of NH Investment & Securities stated, "LIG Nex1's sales in the first quarter of this year are expected to increase by 14% year-on-year to 487 billion KRW, while operating profit is expected to decrease by 23% to 39 billion KRW." He analyzed, "Due to the nature of the business, earnings forecast visibility is low, but considering that last year's first quarter profitability was influenced by one-off factors such as exchange rate effects and reversal of loss provisions, the decline in operating profit is largely attributable to a base effect."

From a mid- to long-term perspective, now is seen as an opportunity to buy at a low price. Researcher Lee said, "Last year, LIG Nex1 secured large-scale development projects in the domestic market, including the Korean-type long-range artillery missile defense system (LAMD) and long-range air-to-ground missiles, and achieved new orders worth 6.4 trillion KRW, including an export contract for medium-range surface-to-air missiles (M-SAM) to the United Arab Emirates (UAE), resulting in the largest order backlog in history." He added, "Considering this, the mid- to long-term earnings growth trend is expected to continue."

Furthermore, amid escalating tensions due to geopolitical conflicts between countries such as the Russia-Ukraine war and US-China hegemonic competition, the demand for precision-guided munitions is expected to expand significantly. Researcher Lee noted, "It is known that in February, LIG Nex1 signed a memorandum of understanding (MOU) with Romania's state-owned defense company Romarm in the field of surface-to-air missiles." He added, "Since the demand for precision-guided munitions is expected to increase in the future, the possibility of additional overseas orders is also considered very high."

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