Kiwoom Securities said on the 15th that profitability will keep improving for LS Eco Energy(229640) as the share of high‑margin products such as high‑voltage (HV) cables and bus ducts increases.
It raised its investment opinion to "buy" (BUY) from "outperform," and lifted the target price to 57,000 won from 53,000 won. The previous session's closing price was 43,600 won.
Cho Jae-won of Kiwoom Securities said, "The current share price has entered an attractive valuation zone both historically and versus comparable domestic companies," and noted, "New-business potential in subsea cables and rare earths remains ample."
Kiwoom Securities estimated LS Eco Energy's second-quarter consolidated revenue at 313.2 billion won, up 10% from the prior quarter and 25% from a year earlier. It projected operating profit of 22.9 billion won (operating margin 7.3%), topping the market consensus of 21.1 billion won.
Cho said, "In the second quarter, companywide top-line growth led by LS-VINA will stand out," adding, "With solid demand for high-voltage (HV) cables, a rebound in distribution cable sales and growth in materials revenue are expected."
He added, "For LSCV, normalization of UTP cable sales and high growth in bus duct revenue are anticipated."
However, the companywide operating margin is expected to fall by 2.1 percentage points year over year due to a higher materials mix and tariffs on UTP cables bound for North America.
The analyst noted that increasing the share of high‑margin products is a key driver that will lead to continued profitability improvement.
LS Eco Energy expanded the share of high‑voltage cable revenue from 6.3% to 9.8% last year, and with sales volumes concentrated before tariff implementation, it posted an operating margin of 7.0%.
This year, as materials revenue grows, the mix‑improvement effect will be partly limited, but the bus duct segment is expected to serve as a new growth engine. Within LSCV, the share of bus duct revenue is projected to exceed 10% starting this year.
In particular, starting next year, the product lineup is set to expand to ultra‑high‑voltage (UHV) cables. LS Eco Energy is conducting PQ tests for production of UHV cables of 400 kV or higher, and certification could be completed within the year at the earliest, enabling full‑scale production and sales from next year.
Cho said, "As the company enters the European and North American UHV markets, which LS Cable & System has addressed, the share of exports with superior profitability will grow compared with before," adding, "Next year's operating profit will reach 96.7 billion won, up 15% from a year earlier."
The analyst also said the recent share price decline, which left new‑business expectations not priced in, adds to the investment appeal. Beyond UHV cables, LS Eco Energy is preparing high‑value new businesses such as high‑voltage direct current (HVDC) subsea cables and rare‑earth metal manufacturing.
Cho explained, "In the past, the share price jumped whenever new‑business expectations materialized or synergies with LS Cable & System were confirmed," adding, "The current price, at 12‑month forward price‑to‑earnings ratio (PER) of 23.6 times, has been adjusted to a level where most of the new‑business expectations have faded."
He added, "Given solid earnings momentum and profitability superior to domestic peers, the current valuation is an attractive zone."