Shinhan Investment & Securities said on the 24th that LS Electric(010120) posted record-high results and orders, and assessed that it can respond with short lead-time competitiveness centered on switchboards and ongoing capacity expansions.
It maintained a "buy" investment opinion and raised the target price by 19% to 250,000 won from 210,000 won. The previous trading day's closing price was 223,500 won.
Lee Dong-heon, an analyst at Shinhan Investment & Securities, said, "Second-quarter revenue rose 32% on-year to 1.577 trillion won, and operating profit increased 64% to 178.5 billion won (operating margin 11.3%), with both revenue and operating profit hitting all-time quarterly highs."
This is 5% above the market consensus for revenue and 9% above for operating profit, respectively. The analyst said, "With a higher share of big tech power infrastructure projects and productivity gains from improved utilization rates, margins have entered a structurally growing phase," and noted, "There was some impact from rising prices of certain raw materials, but conditions have now normalized."
Orders and the business environment are also maintaining steep growth. New orders in the second quarter jumped 243% on-year to 2.1 trillion won, and the order backlog climbed 82% to 7 trillion won, both record highs.
New switchboard orders alone surpassed 1 trillion won, and the backlog for ultra-high-voltage transformers also rose 88% on-year to 3.3 trillion won. The annual order target is expected to be raised from 4 trillion won to the 6 trillion–6.5 trillion won range.
The analyst said, "There is valuation pressure, but as mid- to long-term growth continues with penetration into the U.S. data center and power infrastructure markets, this is a phase to focus more on capacity (Capa) expansion and earnings growth than on valuation."