[Click eStock] "LIG Nex1, Rapid Profit Improvement... Investment Rating and Target Price Raised"

Investment Rating Upgraded from 'Neutral' to 'Buy'
Target Price Set at 5.8 Million Won

On October 23, Korea Investment & Securities upgraded its investment rating on LIG Nex1 from 'Neutral' to 'Buy', projecting continued profit improvement. The target price was set at 5.8 million won.

Jang Namhyun, a researcher at Korea Investment & Securities, stated, "Since July, the stock price has dropped by 29.7%, and as a result, the 2026 price-to-earnings ratio (PER) has decreased from 34.0 times to 23.8 times, leading to a discount compared to the average valuation of European peers. However, the compound annual growth rate (CAGR) of earnings per share (EPS) from 2024 to 2027 is 33.2%, which surpasses the average growth rate of European peers at 27.4%. Considering the rapid pace of profit improvement, there is no reason for a valuation discount."

LIG Nex1's third-quarter results this year are expected to meet market expectations. Jang explained, "On a consolidated basis, third-quarter sales are projected to increase by 42.0% year-on-year to 1.051 trillion won, and operating profit is expected to rise by 49.9% to 77.9 billion won, in line with the consensus (the average forecast by securities firms) of 79.2 billion won in operating profit." He added, "The operating margin is estimated to fall by 0.8 percentage points compared to the previous quarter, reflecting operating losses from Ghost Robotics and one-off investment costs of 15 billion won." The core defense business is expected to continue improving its performance. Jang noted, "As revenue from major development and mass production projects continues to be recognized, third-quarter domestic sales are expected to rise by 39.6% to 824.5 billion won, while overseas sales are estimated to increase by 51.2% to 226.5 billion won, driven by increased sales of the highly profitable Cheongung-II mass production project in the Middle East."

Operating profit improvement is expected to continue, driven by revenue recognition from highly profitable export businesses. Starting in 2025, in addition to increased mass production sales from the Cheongung-II project in the United Arab Emirates (UAE), sales from projects in Saudi Arabia and Iraq are also expected to increase sequentially from next year. Jang projected, "Accordingly, operating profit in 2026 and 2027 is expected to increase by 34.6% year-on-year to 466.7 billion won and by 27.7% to 595.9 billion won, respectively." He added, "Furthermore, since the revenue recognition period for mass production export projects is estimated to exceed five years, profit improvement is expected to continue beyond 2028."

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