[Edaily Reporter Kim Hyung-il ] SKSecurities maintained its “Buy” rating on LS(006260), anticipating continued earnings improvement in the second half of the year, particularly in the wire and cable and LS ELECTRIC (ELECTRIC) divisions. However, it lowered the target price to 540,000 won to reflect a valuation adjustment following the decline in LS ELECTRIC’s stock price.
(Source: SKSecurities)
On the 11th, Choi Kwan-soon, an analyst at SKSecurities, stated, “ELECTRIC’s expansion of its portfolio from power distribution to power transmission is effective,” adding, “We expect third-quarter operating profit to reach 185.2 billion won, a 3.8% increase from the previous quarter.”
He also predicted that LS Cable’s earnings improvement would continue. Analyst Choi explained, “LS Cable’s consolidated order backlog for the second quarter reached 9.5535 trillion won, an all-time high,” and added, “Sales and profitability for underground cables and bus ducts continue to improve, and sales to TenneT are expected to begin in the fourth quarter.” Accordingly, he projected third-quarter operating profit to reach 155.3 billion won, a 9.9% increase from the previous quarter.
LS I&D is expected to see continued growth in demand and rising unit prices for electric vehicle and transformer windings. Analyst Choi added, “LS I&D will see continued growth in demand and rising unit prices for electric vehicle and transformer windings,” noting, “There is a possibility that this year’s operating profit could reach 2 trillion won.”
Analysts note that despite weak smelting fees, sulfuric acid prices at LS MnM continue to rise. Analyst Choi noted, “The precursor facility is scheduled for completion in November, and the nickel smelter in Indonesia is set to begin operations in the first quarter of 2027,” and predicted, “Operating profit this year and next year will reach around 500 billion won.”
He also projected that earnings improvements at major subsidiaries would continue in the second half as demand for power infrastructure expands. Analyst Choi estimated LS’s consolidated operating profit for the second half at 925.4 billion won, representing a 2.8% increase compared to the record-high first-half performance.
Regarding LS’s enterprise value, he focused on the value of LS Cable and the discount rate relative to its net asset value (NAV). LS Cable is an unlisted company traded on the K-OTC market, with a market capitalization of approximately 3.4 trillion won. In contrast, the value of LS’s stakes in listed companies—including GAONCABLE, LS Eco Energy, and LS Marine Solution—totals approximately 8.6 trillion won.
SKSecurities evaluated the value of LS Cable based on its K-OTC price but noted that LS’s current NAV discount rate stands at 55.6%, which is higher than the post-2024 average of 53%. Analyst Choi stated, “Given that the company is posting record-high earnings, the current discount rate is a cause for concern.”
The firm also viewed the cancellation of treasury stock as a potential additional catalyst for the stock price. LS holds 12.3% of its total issued shares as treasury stock; of this, 1.2% consists of exchangeable bonds, and 11.1% is eligible for cancellation. The company retired 1.6% of its shares in August of last year and February of this year, respectively, though the timing of the next retirement has not been determined. However, since shares eligible for retirement must be retired by September 2027 in accordance with amendments to the Commercial Act, this is expected to serve as a potential catalyst for the stock price in the future.
Analyst Choi stated, “Favorable market conditions continue for key businesses such as wire and cable, I&D, and Electric,” adding, “There is also potential for the high discount rate to narrow through the cancellation of treasury shares, indicating strong upside potential.” Regarding the rationale for setting the target price at 540,000 won, he explained, “This reflects a valuation adjustment due to the decline in Electric’s stock price,” adding, “Considering the favorable business conditions and rising copper prices, there is potential for further upside.”
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