Seven Consecutive Record Highs, But the Real Reason Lies Elsewhere... LS ELECTRIC Surges Amid Soaring U.S. AI Data Center Investments [This Week's Hot Stock]

LS ELECTRIC is benefiting from the global big tech companies' increased investments in artificial intelligence (AI) data centers. The company has successfully secured orders even in sectors where it previously lagged behind competitors, effectively offsetting its weaknesses while maximizing its strengths. As a result, securities firms are racing to raise their target stock prices.

As of April 30, LS ELECTRIC's stock price stood at 278,000 won, marking a 52-week high and setting new record prices for seven consecutive trading days. The main reason behind the rapid rise in the share price is the stock split. LS ELECTRIC suspended trading from April 8 to 10 to carry out a 5-to-1 stock split, reducing the par value per share from 5,000 won to 1,000 won. When trading resumed on the 13th, the stock closed at 179,200 won, up 21,600 won (13.71%) from the previous trading day. On the 14th, it hit a new high of 185,600 won at closing, then fell for five consecutive sessions, but rebounded to 194,200 won on the 22nd, continuing its upward trend. A stock split lowers the par value of existing shares in a set ratio, increasing the number of shares in circulation. This leads to a lower price per share and improves accessibility for investors, while companies benefit from enhanced liquidity.

Founded in 1974, LS ELECTRIC is a leading power infrastructure company that provides power solutions, automation equipment, and smart grid systems for energy efficiency. Since its rebranding in 2020, the company has aggressively expanded its business portfolio through mergers and acquisitions in global markets such as North America and Europe. Notably, it acquired the EGT business unit of Parker Hannifin, North America’s largest ESS company, as well as a leading domestic small transformer company (now LS Power Solution), thereby securing both production bases and technological capabilities.

The market sees more than just a short-term stock split effect, believing that LS ELECTRIC has fundamentally strengthened its core fundamentals. In particular, the company has continued to win orders in the ultra-high-voltage transformer sector, previously considered a relative weakness, and this has contributed to LS ELECTRIC's sales. In the third and fourth quarters of last year, LS ELECTRIC announced large-scale contract wins for North American renewable energy projects. The company’s U.S. subsidiary secured contracts to supply ultra-high-voltage transformers, valued at 138.2 billion won and 459.8 billion won, respectively. In the second quarter of this year, its subsidiary LS Power Solution signed a contract to supply 106.6 billion won worth of ultra-high-voltage transformers to a U.S. big tech company. These ultra-high-voltage transformer orders have had a direct impact on revenue. As of the first quarter of this year, sales in this sector surged by 83% year-on-year, and ultra-high-voltage transformers accounted for 3.1 trillion won, or 55.4%, of the total order backlog.

In the power distribution segment, considered one of its strengths, LS ELECTRIC won large orders worth 162.5 billion won and 190.5 billion won from U.S. big tech clients last year, followed by a massive 170.3 billion won power distribution solution order in the second quarter of this year (with distribution panels comprising 75% and distribution transformers 25%). On April 29, the company also signed a contract to supply approximately 319 billion won worth of power distribution solutions to global energy company Bloom Energy.

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These consecutive order achievements have translated into strong performance. In the first quarter of this year, LS ELECTRIC posted record results. On a consolidated basis, revenue reached 1.3766 trillion won and operating profit was 126.6 billion won, up 33.4% and 45%, respectively, compared to the same period last year. LS ELECTRIC noted that North American sales in the first quarter hit a quarterly record of around 300 billion won, driving the positive results.

LS ELECTRIC is not content to rest on its large order wins and is actively reinvesting. The company is simultaneously expanding production of ultra-high-voltage transformers and distribution panels, which have driven its sales growth. For ultra-high-voltage transformers, its subsidiary LS Power Solution is considering further expansion after completing a capacity increase in November 2024. The company’s Busan plant dramatically expanded annual sales capacity from 200 billion won at the end of last year to over 700 billion won. Both the Cheongju plant, responsible for domestic distribution panels, and its partner companies are considering expansion, while overseas, additional expansions of over 700 billion won are planned in the U.S. by the end of 2030. There are also plans to expand power distribution equipment at the Bastrop, Texas site, and factories in Southeast Asia such as Vietnam are reportedly under consideration for expansion as well.

The securities industry has given a positive assessment of LS ELECTRIC's additional stock price growth potential. On April 22, Sung Jonghwa, analyst at LS Securities, raised his target price from 228,000 won to 260,000 won, and then to 350,000 won on the 28th. He explained, "With the ongoing shortage of ultra-high-voltage transformers in the U.S., a super-boom cycle is expected to continue in the long term, and demand for power distribution products to supply hyper-scale AI data centers for big tech companies is also expected to surge."

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On April 23, Minjae Lee, an analyst at NH Investment & Securities, raised his target price from 210,000 won to 220,000 won and then revised it to 275,000 won four days later. He cited the following reasons for the upward adjustment: the increasing number of North American data center customers, the rising number of domestic and overseas production relocation projects, and the company’s entry into a phase of direct performance improvement, all of which make achieving LS ELECTRIC’s 2030 sales target of 10 trillion won a realistic goal.

Hyejeong Jeong, an analyst at KB Securities, projected that continued growth in demand for power distribution equipment in the U.S. market and increasing new orders for domestic and international data centers would further boost the stock price. However, she added that if competitors continue to invest in production capacity or if orders from U.S. big tech companies are delayed, there is a possibility that the target price may not be met.

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