KB Securities said on the 20th that orders for power equipment for North American big tech and data centers for LS Electric(010120) are proceeding smoothly. It raised its target price by 16.7% to 280,000 won and maintained a "Buy" investment opinion. The previous session's closing price was 190,000 won.
Jung Hye-jung, a KB Securities researcher, said, "We revised up our previous new order outlook as orders from North American big tech continued in various areas from power distribution equipment to ultra-high-voltage transformers in the second quarter of this year."
According to KB Securities, LS Electric's second-quarter revenue this year is estimated at 1.335 trillion won, up 11.9% from a year earlier, with operating profit at 156.9 billion won, up 44.5%. Net profit attributable to controlling shareholders is forecast to surge 110.6% to 141.2 billion won. KB Securities analyzed that the operating profit estimate is in line with the market consensus (outlook).
The backdrop for strong results includes continued revenue recognition from orders for switchboards and power distribution equipment for data centers at home and abroad, and a higher sales contribution from ultra-high-voltage transformers thanks to the effect of new capacity completed late last year.
As the sales share of higher-margin items expands, the operating margin in the second quarter of this year also appears set to rise 2.7 percentage points year over year to 11.8%.
Jung also said that new orders, the company's key growth driver, are showing steep growth. LS Electric secured about 800 billion won in orders across a wide spectrum in the second quarter of this year, including power distribution equipment and switchboards for North American big tech and data centers, and medium- to low-voltage and ultra-high-voltage transformers.
Jung said, "Given the characteristics of medium- to low-voltage power equipment, there are more small contracts that do not meet the disclosure threshold, so total new orders in the second quarter will reach 2 trillion won, exceeding the previous quarter's 1.3 trillion won."
Jung also said LS Electric's annual new order guidance (target) is highly likely to be raised from the existing 4.1 trillion won. Because of the repetitive nature of big-tech orders, medium- to long-term growth is expected to continue. However, risks that could push the share price below the target include competitors' continued production capacity investments and delays in big-tech orders in the United States.