This year, LIG Nex1's proportion of overseas sales is expected to surpass 30% for the first time. This is due to export volumes such as Cheongung-II being recognized as revenue starting this year from over 20 trillion won in order backlog accumulated until the end of last year. The defense industry believes that if the export of the guided rocket Bi-Gu is confirmed to the United States within this year, LIG Nex1's status will be further elevated.
According to the defense and securities industries on the 21st, LIG Nex1's sales in the fourth quarter of last year (October to December) are expected to be between 860 billion won and 900 billion won, with operating profit projected to be around 43 billion to 50 billion won. Operating profit is expected to fall below consensus estimates. This is due to year-end provisions related to domestic project development costs and the 4th-quarter operating loss (about 5 billion won) of the U.S. quadruped robot manufacturer Ghost Robotics, acquired last year.
As the overseas order backlog accumulated in recent years is reflected in this year's performance, profitability is expected to improve. As of September 30 last year, LIG Nex1's order backlog was 18.4 trillion won, which is eight times the annual revenue of 2.3 trillion won for 2023.
The domestic interceptor system Cheongung-II (M-SAM) is a key item driving LIG Nex1's export expansion. Contracts for the delivery of Cheongung-II have been signed with three Middle Eastern countries: the United Arab Emirates (UAE) for 3.7 trillion won in 2022, Saudi Arabia for 4.25 trillion won in 2023, and Iraq for 3.7 trillion won in 2024. The export volume of Cheongung-II contracted with Iraq last year has not yet been included in the order backlog, and when reflected, the year-end order backlog from last year is expected to exceed 20 trillion won. Compared to the end of 2021, before opening up Middle Eastern exports, the order backlog has increased nearly threefold (8.3 trillion won).
Exports of Cheongung-II are expected to be recognized as revenue sequentially from this year through 2027. The exports of Cheongung-II to the UAE and Saudi Arabia will be formally recognized in this year's revenue. Accordingly, the proportion of exports in LIG Nex1's total revenue this year is expected to exceed 30%. The share of overseas sales rose from 4.5% in 2021 to 26.4% in the third quarter of last year.
Last month, the credit rating agency Korea Credit Rating has maintained the credit rating of LIG Nex1 at 'AA-' and raised the outlook from 'stable' in June 2023 to 'positive,' the highest level. HanShinPyeong noted, 'LIG Nex1 has established a monopolistic position in the guided weapon sector of the domestic defense industry, and the surge in order backlog due to export contracts is expected to be gradually reflected in operating performance starting in 2025.'
The export pipeline is also solid. It is reported that the long-range surface-to-air missile (L-SAM) developed last year and now in mass production has attracted interest from the UAE. The Defense Acquisition Program Administration is said to be pursuing a package export of L-SAM along with Cheongung-II.
In the defense industry, if the export of the anti-ship guided rocket Bi-Gu is confirmed in the second half of the year, LIG Nex1's stature is expected to rise to the next level. Bi-Gu successfully hit all six targets during the final test launch of the Foreign Comparative Test (FCT) overseen by the U.S. Department of Defense last July, raising expectations for its export. Observations suggest that the newly inaugurated Donald Trump administration on the 20th (local time) will be the final variable as the U.S. Navy is currently reviewing the budget for the introduction of Bi-Gu. Bi-Gu can also be mounted on the unmanned surface vessel Haegum-3 developed by LIG Nex1, making it noteworthy in terms of the expansion potential for unmanned system exports.