KB Securities raised its target price for Poongsan on the 29th, stating that the company's guidance on the impact of expanding 155mm shell production is conservative. It maintained a 'buy' investment opinion and set the target price at 200,000 won, a 19% increase. The closing price of Poongsan the previous day was 162,000 won.
Researcher Choi Yong-hyun of KB Securities noted, "Considering the increase in average selling price (ASP) and the rise in sales of extended-range ammunition, I estimate the impact of the expanded 155mm shell production to be more aggressive than the guidance."
Poongsan presented a revenue guidance of 250 billion won. Researcher Choi stated, "If reversed, the ammunition set price is estimated to be about $4,500, but according to media reports, European ammunition prices are about $8,000."
Poongsan pointed out that it is necessary to consider that ammunition prices have risen compared to the guidance provided when it announced its fourth quarter results for 2023.
Researcher Choi stated, "Ammunition has low raw materials costs, so an increase in ASP will lead to improved revenue," adding, "The ASP of the extended-range ammunition that Poongsan is mass-producing is more than double that of existing products, and since domestic deliveries have already started, overseas sales are expected to begin soon."
Demand for warheads is still considered high due to ongoing geopolitical conflicts. Researcher Choi stated, "As competitors' capacity (Capa) expansion speeds slow, Poongsan will increase the operation rate of its new factory and boost its global market share."
He further analyzed, "Since a large proportion of warheads are under long-term contracts, we believe stable results will continue in the medium to long term," and he added, "Even if geopolitical risks decrease, the performance momentum will continue."
He then revised the annual operating profit estimate for this year upward by 6.2% and for next year by 5.6%.
Researcher Choi said, "Poongsan's stock price remains attractive from a valuation perspective, and if performance visibility improves with order disclosures, additional stock price increases are expected."