[Edaily Reporter KIM YOON-JEONG ] LS SECURITIES noted that while LG Corp.(003550) CNS’s second-quarter profitability fell short of market expectations due to expanded investments in future growth businesses such as artificial intelligence (AI) platforms and physical AI, this is a temporary phenomenon and growth momentum is expected to continue across all business divisions. The firm maintained its “Buy” rating and target price of 96,000 won.

On the 3rd, Seon Yu-jin, an analyst at LS SECURITIES, stated, “We view this slowdown in profitability as a temporary phenomenon resulting from differences in revenue recognition timing, and we are focusing instead on the possibility that the results of investments for mid- to long-term growth will materialize faster than expected.”
LG CNS’s second-quarter consolidated revenue reached 1.5208 trillion won, a 4.2% increase year-over-year, but operating profit fell 9.2% to 127.9 billion won. The operating profit margin (OPM) stood at 8.4%, falling short of market consensus.
All business divisions continued to grow, with revenue in the Cloud & AI division rising 3.9% year-over-year, Smart Engineering up 3.0%, and Digital Business Services (DBS) up 6.0%. However, the growth rate slowed compared to the previous quarter as project contract schedules for some affiliates were postponed to the second half of the year, and expanded investments in AI platforms and physical AI also impacted profitability, according to the report.
LS SECURITIES assessed that the company’s mid- to long-term growth drivers are actually strengthening. LG CNS has secured a contract to build a robot data factory for LGELECTRONICS and plans to supply the Physical Works platform and graphics processing unit (GPU) resources. The firm also analyzed that the company’s growth base is diversifying toward overseas and external customers through the construction of smart factories at major affiliates’ overseas plants and the expansion of proof-of-concept (PoC) projects for external clients.
Research Analyst Seon explained, “As the need for AI-adopting companies to optimize token costs becomes more prominent, the company’s role as a Managed Service Provider (MSP) is expanding,” adding, “Following the OpenAI reseller partnership agreement, the recent signing of a contract with Anthropic to implement Claude Enterprise is expected to drive MSP revenue growth centered on affiliated companies.”
The firm also projected that the financial sector’s Digital Business Services (DBS) business would drive improved performance. Revenue from next-generation system construction projects secured last year is now materializing in earnest, and growth is expected to accelerate further starting in the second half of the year as projects secured this year are reflected in the results.
LS SECURITIES also expressed optimism regarding the potential to secure additional projects as the financial sector’s AI Transformation (AX) expands following future regulatory easing. Analyst Seon assessed, “The company possesses a solid growth story: in the short term, expanding AX demand in the financial sector; in the medium term, the expansion of the MSP and DBO markets driven by AI infrastructure bottlenecks; and in the long term, the growth of physical AI platforms.”
He added, “The company is expected to maintain its shareholder return policy of distributing 40% of consolidated net income as dividends this year as well, and is expected to resolve to pay an interim dividend during the third quarter,” noting, “We believe the current stock price, at a 12-month forward price-to-earnings (P/E) ratio of 9.7x, is in a range where a re-rating is possible.”