[Click eStock] NH "Record-breaking performance but Pungsan still undervalued"

Despite Strong Defense Performance, Still Undervalued
Industry Forward PER at 20x, but Only 7-8x for Pungsan

Despite Pungsan achieving record-breaking performance due to the defense industry boom, analysis shows that it remains undervalued in the market.

On the 20th, NH Investment & Securities raised Pungsan's target price by 7.6% to 86,000 KRW and maintained a buy rating for this reason. The closing price the previous day was 58,900 KRW. The analysis suggests there is an additional upside potential of 46%.

The basis for the upward potential evaluation is the performance. Pungsan recorded consolidated sales of 4.5544 trillion KRW and operating profit of 323.8 billion KRW last year. Compared to the same period last year, sales increased by 10.4% and operating profit by 41.6%, marking a record-breaking performance. Sales and operating profit in the defense sector increased by 19.2% and 63.5%, respectively, driving the performance growth. This was due to increased global demand for shells amid rising geopolitical risks.

Growth is expected to continue this year as well. The company presented a defense sales guidance of 1.258 trillion KRW for this year, anticipating a 6.7% growth compared to last year. It expects export expansion to continue based on solid domestic demand. The guidance for non-ferrous metal sales volume was also set at 185,000 tons, a 3.6% increase compared to the same period last year.

The company's three-year average operating profit ratio shows that defense accounts for 74% on a separate basis. Nevertheless, it is analyzed to be excessively undervalued. Lee Jaegwang, a researcher at NH Investment & Securities, explained, "Although it may vary depending on copper price fluctuations, if the current price level continues, the defense sector's share of profits this year will be around 70-80%. The average 12-month forward price-to-earnings ratio (PER) of global defense industry stocks, including South Korea, is about 20 times, but Pungsan is traded at only 7-8 times, indicating severe undervaluation."

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