LG Group's IT service subsidiary LG CNS is pushing its artificial intelligence (AI) business to aim for a rebound in its stock price, but the securities market's response remains lukewarm. Although it is expanding cooperation with global AI corporations and applying AI solutions to various industries including finance, manufacturing, and distribution, it is questionable whether the stock price trend can be changed solely through AI investments given the industry is overlooked.
According to industry sources on the 11th, LG CNS's stock price, which had been on a downward trend since its listing last month, has recently recovered to the 50,000 won range, showing signs of rebound. The stock price had fallen 25% below the public offering price (61,900 won), reaching 46,500 won during trading on the 28th of last month, but recovered to 51,200 won as of the 7th.
However, there are still significant losses compared to the public offering price, and the rebound speed is sluggish compared to other AI-related stocks that are receiving market expectations.
Among shareholders, there is a greater sense of disappointment than expectation since the listing. One shareholder noted, "I started with the public offering but I am stuck. I am in the process of generating revenue after a second purchase, but I feel disillusioned and think I need to sell next week." Another shareholder expressed hope for long-term recovery, saying, "Foreign and institutional investors have begun to enter, so it may be worth waiting," but many investors are taking a more cautious strategy, suggesting, "As pension funds continue to buy, we can respond according to that timing."
Analysts have noted that the stock price decline right after the listing was an anticipated trend. The initial public offering (IPO) had garnered expectations with a competition ratio exceeding 100 to 1 and 21 trillion won in the security deposit, but ultimately it failed to overcome the inherent limitations of being an IT service corporation.
In particular, the burden of pre-existing sales from Macquarie PE (28.49%) and the significant amount of unsold shares held by institutional investors contributed to the continued selling pressure. Additionally, while LG CNS is promoting AI, the unclear connection with its existing business has raised concerns among investors.
LG CNS continues to announce expansions in AI business and collaborations with global corporations after its listing. On the 10th, it signed a partnership for 'Agentic AI' with Canadian AI corporation 'Cohere,' marking the first such partnership in South Korea. On the 4th, it launched a 'Generative AI Collaborative Organization' with Amazon Web Services (AWS).
However, there is still skepticism regarding the synergy with LG CNS's existing business model and whether it will lead to direct revenue generation models. Criticism exists that it is merely at the level of technical cooperation, ultimately just serving as a subcontractor for big tech.
LG CNS is also pushing to expand its infrastructure for AI services, but the market's response is cold. On the 13th of last month, it signed a memorandum of understanding (MOU) for AI infrastructure cooperation with Dell Technologies and is currently in the process of building AI data centers.
However, this area is already one where competitors have entered, and the lack of differentiation is a problem. Targeting the financial AI market, LG CNS has won several projects including with NH Nonghyup Bank and Shinhan Card, but prevailing evaluations indicate it is merely an extension of its existing systems integration (SI) business.
In response, LG CNS is currently reorganizing and recruiting talent to strengthen its AI strategy. Recently, it hired Min Se-hoon, an AI consulting expert from Bain & Company, and established a new AI cloud division.
Securities firms are still maintaining a cautious stance. As it is still early after the listing, they are refraining from issuing formal investment opinions, and they plan to provide forecasts after confirming whether the AI business leads to actual performance improvements.
Typically, major IPO corporations receive competitive analysis reports from leading securities firms after listing, but more than a month after its listing, no reports have emerged for LG CNS.
An industry insider stated, "Although LG CNS is putting AI front and center, if it does not demonstrate clear strengths in competitiveness and profitability, the rebound in stock price will be limited," adding, "Currently, we are at a stage that requires verification rather than expectation."