[Click eStock] "LS Electric Expected to Meet Q4 Earnings Estimates... Stock Price Decline Overdone"
Kiwoom Securities maintained its 'Buy' rating and target price of 110,000 KRW for LS ELECTRIC on the 20th, expecting the company's Q4 earnings this year to meet market expectations.
Ji-san Kim, a researcher at Kiwoom Securities, said, "Although the stock price plunged as Q3 earnings fell short of market expectations, Q4 is expected to see strong performance led by power infrastructure, meeting market expectations again."
LS ELECTRIC's Q4 earnings are expected to align with market forecasts and benefit from the peak season effect. Researcher Kim explained, "The power infrastructure order backlog increased further to 1.88 trillion KRW at the end of Q3, continuing a strong growth trend compared to the same period last year. Orders for substations from Korea Electric Power Corporation (KEPCO) and sales of ultra-high voltage transformers are also increasing. The automation solutions segment, which recorded losses last quarter due to concentrated R&D expenses, is expected to turn profitable alongside reduced distribution inventory."
LS ELECTRIC's earnings improvement is expected to continue into next year. Kim forecasted, "Operating profit will increase by 75% year-on-year to 328.3 billion KRW this year and further improve by 8% to 353.1 billion KRW next year. This is supported by a sufficient order backlog in power infrastructure, recovery of the automation solutions segment and the China subsidiary, and a reduction in losses in the renewable energy business division."
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He also expressed the view that the stock price decline is excessive. Kim said, "Considering the promising mid-to-low voltage distribution network sector, driven by electric vehicle charging infrastructure and renewable energy-focused microgrids in the mid-to-long term, and the solid earnings performance, the stock price drop is overdone. Despite expected record-high earnings this year and next, the price-to-earnings ratio (PER) stands at only 9.9 and 8.5 respectively, indicating strong valuation appeal."
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