[Click e-Stock] "LS Expanding Beyond Power to Strategic Resources... Target Price Raised"

Shinhan Investment & Securities Raises LS Target Price to 600,000 Won
"LS Cable & System, MnM, and I&D Enter Margin Improvement Phase"

On May 19, Shinhan Investment & Securities raised its target price for LS to 600,000 won, a 64.38% increase, while maintaining its “Buy” recommendation, citing the company’s continued benefit from the power infrastructure cycle.

For the first quarter, LS reported consolidated sales of 9.5044 trillion won (up 37% year-on-year) and operating profit of 476.1 billion won (up 56%). The operating profit surpassed market expectations by 23%.

LS Cable & System posted an operating profit of 97.1 billion won (up 17%), as the expansion of high-margin products such as underground and submarine cables and bus ducts led to both top-line growth and improved operating margins. LS MnM achieved an operating profit of 189.6 billion won (up 154%), despite weaker refining charges due to deteriorating copper concentrate supply, thanks to strong copper premium at the end of last year and a sharp rise in by-product prices. LS I&D also demonstrated strong growth in specialty winding sales for electric vehicles (EV) and transformers.

The cable subsidiaries have entered a phase of margin improvement through selective order intake. From the second half of this year, LS Cable & System’s revenue from submarine cables for the TenneT project is expected to ramp up, lifting the company-wide average margin. While it may take time for a full recovery in LS MnM’s copper refining business, robust prices for by-products such as gold and sulfuric acid are expected to support earnings.

Choi Min-ki, a research analyst at Shinhan Investment & Securities, commented, “The performance of companies in the power infrastructure value chain has entered a phase of structural growth. In particular, LS is expected to benefit significantly as it is aggressively expanding local production capacity for key items (submarine cables, bus ducts) in North America to meet the surging power demand from artificial intelligence (AI) data centers.”

The analyst also gave a positive assessment of LS MnM’s efforts to establish a battery materials business based on a supply chain decoupled from China. In February, LS MnM decided to acquire PT TMI (Teluk Tetal Industry), a nickel smelter in Indonesia. The company plans to source nickel intermediate product (MHP) from the acquired firm and produce nickel sulfate at its Onsan smelter. Nickel sulfate serves as a feedstock for high-nickel precursors, which are a major component for domestic cathode materials manufacturers. Mass production is expected to begin between the end of this year and early next year.

Choi added, “The group is leveraging its midstream strengths (transportation, storage, processing, and refining in the oil and gas value chain) to expand its portfolio into strategic resource sectors. Proactive entry into nickel and rare earth elements, where supply chains need to be decoupled from China, is expected to serve as an additional catalyst for a re-rating of the company’s stock price.”

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