SK Securities said on the 7th that despite a surge in global interceptor missile demand and constrained production capacity, LIG Nex1 (LIG Defense and Aerospace) is likely to see continued order growth and earnings expansion. It initiated coverage with a "buy (BUY)" rating and a target price of 1.15 million won. The previous trading day's closing price of LIGD&A was 810,000 won.
Han Seung-han, an analyst at SK Securities, said, "Given that earnings growth driven by urgent demand after Russia's invasion of Ukraine continued from late 2022 through last year, there is a high likelihood that results will exceed market expectations over the next two to three years."
Han projects first-quarter revenue on a consolidation basis at 1.1028 trillion won and operating profit at 129.5 billion won this year. That would be up 21.5% and 14%, respectively, from a year earlier.
In particular, overseas export momentum is expected to continue. He said, "With global interceptor missile production capacity limited, additional purchases and requests for early delivery from 'Cheongung-II' customers such as the United Arab Emirates (UAE), Saudi Arabia, and Iraq are highly likely," adding, "Export contracts with new customers in the Middle East and Europe are also anticipated."
He added, "Starting this year, mass-production deliveries for the UAE-bound 'Cheongung-II' program will ramp up in earnest, and in 2027–2028, deliveries to Saudi Arabia and Iraq will be added sequentially, leading to continued revenue and profit growth as the export share expands."
He also projected, "The long-range surface-to-air missile (L-SAM), which is currently in mass production domestically, is highly likely to secure export contracts faster than expected, so the order momentum will gradually expand."
However, he offered a cautious view on near-term earnings expectations. Han said, "The market expects an earnings surprise from the urgent delivery of UAE Cheongung-II interceptor missiles following the Middle East conflict, but it should be noted that these are previously scheduled quantities and revenue is recognized based on the progress rate."