BNK Investment & Securities said on the 14th that LS(006260) is showing solid fundamentals on the back of benefits from the expansion of the global power infrastructure market and robust results at its subsidiaries. It maintained a "buy" rating and a target price of 500,000 won. The previous session's closing price was 303,500 won.
Kim Jang-won, an analyst at BNK Investment & Securities, said, "Along with traditional power demand, new demand such as artificial intelligence (AI) data centers is creating a structure in which the global power infrastructure market keeps expanding," and noted, "LS is easing downward pressure with unwavering fundamentals, and a trend reversal is expected."
For key subsidiary LS Cable & System, first-quarter standalone operating profit hit a record high this year. In particular, the operating margin improved by 2 percentage points (p) compared with the quarter that posted the highest sales, thanks to the performance of the underground and subsea businesses, which have high profitability.
LS Cable & System's order backlog increased by 50 billion won in three months and now stands at 7.5 trillion won.
Analyst Kim said, "In a global ordering market showing strength, selective orders focused on high value-added projects, taking production capacity (capa) into account, have led to improved profitability," and added, "Through the organic relationships among subsidiaries such as Gaon Cable, LS Eco Energy, and LS Marine Solution, the company is generating production and marketing synergies, and LS Electric is also continuing strong results based on quality orders."
The recently announced guideline allowing exceptions for dual listings is expected to ease uncertainty in the governance structure.
Kim said, "If LS's subsidiary Essex Solutions, which once attempted but abandoned a great-grandchild company initial public offering (IPO), can make a convincing case in terms of shareholder rights and screening, there is institutional room to try again."
Kim also pointed out that from a valuation standpoint, the current share price is undervalued. Analyst Kim Jang-won said, "Excluding LS Electric, whose shares are listed, all unlisted subsidiaries are trading below the value assessed at book value," and added, "For core affiliate LS Cable & System, the over-the-counter transaction price exceeds the book value."