[This Week's Hot Stock] LIG Nex1 Left Behind in Defense Rally: Will 'Cheongung' Boost Its Share Price?

Despite Record Highs for Major Defense Stocks, LIG Nex1 Remains Quiet
Export Share to Expand Significantly from Next Year with Cheongung-II
Anticipation for Unmanned Combat Systems and Drone Expansion

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Defense stocks, which drove the Korean stock market in the first half of the year, continue to hit record highs in the second half, solidifying their position as Korea’s undisputed future growth engine. However, LIG Nex1 has been unable to join the record-breaking rally of its competitors, as its period of consolidation has been prolonged. Market attention is now focused on whether LIG Nex1 will signal a rebound, leveraging the 'Cheongung-II' system, which will begin to be fully recognized as revenue starting next year.

LIG Nex1, Left Behind in the Defense Stock Rally

As of August this year, Korea’s defense industry signed new export contracts worth $23 billion (about 32 trillion won), surpassing the 2022 record of $17.3 billion. In particular, the order backlog for the defense divisions of Korea’s four major defense companies (Hanwha Aerospace, Hyundai Rotem, Korea Aerospace Industries, and LIG Nex1) soared by 388%, from 21.6 trillion won in 2020 to 83.9 trillion won as of August 2025. This highlights the growing presence of Korean companies amid the global restructuring of defense supply chains.

Expectations were quickly reflected in stock prices. Hanwha Aerospace, the leading defense stock, has surged over 220% this year and reclaimed its “Emperor Stock” status (stocks priced over 1 million won) by reaching an all-time high of 1,094,000 won on September 25. Hyundai Rotem and Korea Aerospace Industries, which had been trading sideways in July and August, also set new record highs this month.

However, LIG Nex1 did not share in the gains. After hitting an all-time high of 650,000 won on June 23 and then retreating, LIG Nex1 has lost all its earlier gains and is now down about 22% from its peak. Although the stock briefly rebounded in July on expectations of inclusion in the Morgan Stanley Capital International (MSCI) Korea Index, it failed to surpass its previous high. This contrasts sharply with the first half of the year, when LIG Nex1 ranked fourth in net foreign purchases (about 499.1 billion won), just behind Hanwha Aerospace (second place, 523.3 billion won), even surpassing Samyang Foods.

Lee Taehwan, a researcher at Daishin Securities, analyzed, “While expectations for MSCI index inclusion (confirmed in August) led to an excessive stock price increase compared to industry peers, the actual pace of earnings growth has been slow. The export portion of sales is still only 17%, and recurring development expenses for future growth and provisions for losses are expected to continue in the second half, so profit expectations should be conservative.” LIG Nex1’s consolidated sales for the third quarter of this year are projected at 979.6 billion won (+32.3% year-on-year), with operating profit at 69.5 billion won (+34.0%), falling short of market expectations (operating profit of 81 billion won).

2026: The Year of Cheongung-II

Despite underwhelming earnings and stock performance, optimism prevails among securities analysts. From 2026, the profit growth of LIG Nex1 is expected to accelerate, driven by the expanded export share of the medium-range surface-to-air missile system 'Cheongung-II (M-SAM2)'. There is also anticipation for the potential success of exporting the guided rocket 'Bigung', which passed final tests over four years, to the United States.

Cheongung-II, known as the “Korean Patriot,” is an upgraded surface-to-air missile system based on Cheongung, with LIG Nex1 responsible for developing and producing interceptor missiles, engagement, and operations control centers. According to LIG Nex1’s disclosures, the total value of Cheongung-II export contracts is about $8.23 billion (approximately 12 trillion won), consisting mainly of the UAE ($2.19 billion), Saudi Arabia ($3.25 billion), and Iraq ($2.79 billion). Of the company’s cumulative order backlog for the second quarter of this year (23.5 trillion won), exports account for about 55% (12.9 trillion won).

Lee Sanghyun, a researcher at BNK Investment & Securities, stated, “Although the overseas sales ratio, which was 23.6% last year, has dropped to around 20% this year as the low-margin radio project in Indonesia concluded, profitability is expected to improve. In 2026, the export ratio is projected to rise again to the low 20% range, potentially reaching a new high.”

Lee Jaekwang, a researcher at NH Investment & Securities, commented, “With the rise in global security threats, demand for air defense systems is expected to continue increasing. If Cheongung-II, which has yet to prove its performance in actual combat, demonstrates its air defense capabilities after deployment in the three Middle Eastern countries (UAE, Saudi Arabia, Iraq), demand for Cheongung-II could surge even further.”

Focusing on Future Growth Over Immediate Profit

LIG Nex1 is also considered an attractive investment due to its meaningful research and development (R&D) investments and mergers and acquisitions (M&A), which, while not immediately boosting profitability, support long-term growth. For example, LIG Nex1’s R&D workforce increased by about 40%, from 2,007 in 2022 to 2,793 at the end of last year, and domestic R&D revenue more than doubled during the same period. As of the third quarter of this year, the number of R&D personnel has reportedly reached 3,028. In the 2026 government budget proposal, the defense R&D budget is set at 5.9 trillion won, up about 19.2% from the previous year (5 trillion won), with numerous R&D projects expected to continue.

LIG Nex1 also expanded into the unmanned ground robot sector by acquiring a 60% stake in U.S. robotics developer Ghost Robotics in 2023. The four-legged walking robot 'Vision 60', produced through Ghost Robotics, is praised for its fully modular parts, making mission changes and repairs easy. Paek Jongmin, a researcher at Yuanta Securities, commented, “This marks LIG Nex1’s entry into the unmanned weapon system market, a key area in next-generation battlefield environments. It is expected to create synergies with the company’s existing precision strike systems.”

The company is also expected to expand its presence in the drone sector. Lee Taehwan of Daishin Securities said, “LIG Nex1 possesses core technologies across advanced weaponry, including precision-guided munitions (PGM), intelligence, surveillance, and reconnaissance (ISR), airborne electronics and electronic warfare (AEW), and command, control, communications, computers, and intelligence (C4I). This positions the company favorably for expansion into drone and counter-drone systems. With its excellent missile technology and experience in building kill chains (target detection-identification-elimination), LIG Nex1 is expected to be highly competitive in producing attack drones.”

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