NH Investment & Securities maintained a "buy" rating for LS on October 13, forecasting that the corporate value of its unlisted subsidiaries will gradually be reflected in the holding company's stock price. However, the firm lowered its target price from 600,000 won to 500,000 won, reflecting a decline in the value of subsidiary investments.
Lee Seung-young, a researcher at NH Investment & Securities, stated, "The potential for a reevaluation of the holding company and the performance momentum of its subsidiary LS Cable remain valid. With the implementation of dual listing guidelines, the value of unlisted subsidiaries like LS Cable and LS MnM will be reflected in the holding company, leading to a reduction in the discount rate."
Currently, LS's discount rate compared to its net asset value (NAV) stands at 65.6%, indicating a significant undervaluation. The closing price of 256,000 won on October 12 is substantially below the estimated NAV of 760,791 won per share calculated by NH Investment & Securities.
The growth of LS Cable, a key subsidiary, was also viewed positively. The expansion of sales in high-margin products such as high-voltage cables and bus ducts is expected to drive performance improvement. Notably, the effects of the Donghae 4 and 5 expansion are anticipated to be reflected in submarine cable sales starting in the fourth quarter of this year.
However, the third-quarter performance is expected to fall short of market expectations. NH Investment & Securities estimates LS's consolidated revenue for the third quarter to be 10.5146 trillion won, a 30.2% increase year-on-year, with operating profit projected to rise 80.2% to 463.4 billion won. This operating profit forecast is below the market consensus of 493 billion won.
The researcher explained, "While LS Cable is expected to improve profits through increased sales of high-margin products, LS MnM is likely to see a decline in profits compared to the previous quarter due to falling exchange rates, copper smelting fees (TC/RC), and weak precious metal prices."
* This article has been translated by AI.
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