[Click eStock] "Pungsan, Valuation Undervalued... Buy Recommendation"

NH Investment & Securities maintained a buy rating and a target price of 55,000 KRW for Poongsan on the 12th, stating that considering the expected defense-led growth with high earnings visibility, the current valuation is undervalued.

Lee Jae-kwang, a researcher at NH Investment & Securities, explained, "The prolonged Ukraine war has caused a global shortage of artillery shells, and in the mid to long term, it is necessary to rebuild artillery shell production facilities," adding, "Norwegian artillery shell company Nammo's order backlog surged 44% year-on-year to about $1.4 billion last year, and investment costs also increased sharply."

He continued, "In the past, they spent an average of 7 million euros, but in 2022, they spent over 100 million euros. However, considering the investment recovery risk, the artillery shell expansion should be divided among several companies in various countries."

The researcher said, "According to media reports, Poongsan is known to be pushing forward with the construction of an artillery shell factory locally at the request of the Polish government," adding, "In the future, Poland will operate 1,000 K2 tanks and 672 K9 self-propelled howitzers, so artillery shell production facilities are needed, making it highly likely to proceed." Poongsan also announced in its Q2 earnings report that it is reviewing the expansion of large-caliber artillery shells domestically. This is analyzed to be due to domestic stockpiling and increased global demand.

NH Investment & Securities recommended buying, judging that unlike the non-ferrous metal sector, which is heavily influenced by copper prices, the defense sector with high earnings visibility is expected to lead growth, and thus the current valuation is undervalued.

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