[Click eStock] "Pungsan, Excessive Undervaluation... Defense Industry Strong Performance Expected to Boost Stock Price"

On the 25th, NH Investment & Securities analyzed Poongsan, stating that "despite the continued growth in the defense sector's performance, the company remains excessively undervalued." Accordingly, they raised the target stock price to 92,000 KRW and maintained a 'Buy' investment rating.

Researcher Lee Jae-kwang of NH Investment & Securities stated, "Poongsan is expected to continue growth driven by the defense sector this year." He added, "An increase in domestic demand due to mass production of extended-range ammunition and increased exports of shells from additional exports of the K9 self-propelled howitzer and K2 tank are anticipated." He also noted, "In February, Poongsan signed a large-caliber ammunition supply contract worth 250 million USD with Hanwha Aerospace."

However, Lee said, "Although the defense sector accounts for an average of 74% of Poongsan's profits over the past three years, the current stock price is still evaluated as a non-ferrous metal industry company, maintaining a lower valuation compared to the industry average." According to Lee, while the global defense industry's average price-to-earnings ratio (PER) is about 20 times, Poongsan is trading at around 7 to 8 times. Last year, Poongsan's operating profit from the defense sector was approximately 253 billion KRW, which is higher than LIG Nex1 and Hanwha Systems, whose market capitalizations exceed Poongsan by more than 4 trillion KRW.

Lee emphasized, "Under a system where one company operates businesses with different characteristics simultaneously, there are limitations to specializing and advancing each business sector to respond swiftly to changes in the management environment." He stressed, "A spin-off is necessary not only to enhance shareholder value but also to improve the fundamental competitiveness of the business." He added, "If a spin-off is executed, considering the current valuation discount rate, the combined value for existing shareholders could be at least twice the current level."

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