SK Securities evaluated on July 24 that LS Electric is simultaneously experiencing an increase in revenue share from AI data centers and the effects of operating leverage. As a result, the firm raised its target price from 240,000 won to 310,000 won while maintaining a 'buy' rating.
Nam Min-sik, a researcher at SK Securities, cited the rising demand for power distribution equipment for AI data centers, securing major local clients in the U.S., and the commencement of domestic conglomerate projects entering the U.S. market as key factors for the upward revision of performance forecasts. He noted that increased capital expenditures (CAPEX) from memory companies are beginning to directly translate into new orders for LS Electric.
Nam stated, "The lead time for switchgear for big tech clients is within 10 months, which allows for faster revenue recognition compared to ultra-high voltage transformers for transmission. Given that first-half orders are directly linked to improved performance this year, LS Electric has the highest visibility among domestic large power equipment companies."
SK Securities projects that LS Electric's revenue for this year will increase by 33.2% year-on-year to 6.6 trillion won, while operating profit is expected to rise by 71.8% to 732 billion won.
The company's second-quarter results also marked a record high for the quarter. Revenue for the second quarter reached 1.577 trillion won, a 32% increase from the same period last year, while operating profit surged 64% to 178.5 billion won. Nam described these results as "free of one-time gains or costs," emphasizing that profitability is structurally improving.
Nam added, "The expansion of data center project contributions and increased factory utilization are occurring simultaneously," noting that the export share of the power business has risen to 53%. He also mentioned that while there were cost pressures due to rising prices of silver and copper, price increases began to be reflected in June, suggesting that further profitability improvements are possible in the second half of the year.
* This article has been translated by AI.
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