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Photo = LS |
[Alpha Biz= Reporter Kim Sangjin] On the 18th, SK Securities revised its target price for LS from 170,000 KRW to 150,000 KRW, an 11.8% reduction, following a sharp decline in the company's stock price. However, SK Securities maintained its "Buy" rating, viewing the recent drop as excessive and considering the potential for continued growth in the company's subsidiaries.
SK Securities noted that LS's stock price decline has been disproportionate compared to the drop in copper prices, which are highly correlated with the stock's movement. Despite the recent downturn, SK Securities believes that improvements in LS's performance, particularly in its wire and electrical businesses, will likely continue into 2025, presenting a buying opportunity from a medium to long-term perspective.
LS's third-quarter results showed a 17.8% increase in revenue, reaching 7.1 trillion KRW, while operating profit declined by 30.5%, falling to 157.1 billion KRW. The decline in operating profit was attributed to poor performances across most subsidiaries, including I&D, MnM, and Electric, which led to a miss of market consensus (252.6 billion KRW).
However, the wire segment performed well, with a 11.7% increase in operating profit due to a rise in the order backlog from 4.4 trillion KRW at the end of last year to 5.1 trillion KRW in Q3.
SK Securities explained that the poor subsidiary performance was driven by a combination of factors, including lower copper prices, unfavorable exchange rates, off-season effects, and changes in revenue recognition. Additionally, LS’s stock has dropped 52.6% from its peak, and the discount to its net asset value (NAV) has reached a year-high of 59.9%.
While copper price declines have been a major factor in the recent stock drop, SK Securities refrained from making any definitive conclusions about the situation. As a result, SK revised the target price downward to reflect the reduced valuation of its electric and wire businesses, but emphasized that the stock's recent decline seems excessive, limiting further downside risk.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
