[Edaily Reporter Kim Kyung-eun ] On the 22nd, SamsungSecurities projected that LS ELECTRIC(010120)(LS Electric) would continue its earnings growth, driven by an expansion in data center-related orders and increased sales in the U.S. market. However, reflecting the recent decline in overall stock market valuations, the firm lowered its target price by 10.8% from 260,000 won to 232,000 won. It maintained its “Buy” investment rating.

Han Young-soo, an analyst at SamsungSecurities, stated in a report released today, “LS Electric has been consistently posting strong earnings despite macroeconomic uncertainty, the strengthening won, and concerns that the industry has peaked,” adding, “This is an environment where the company can maintain a high valuation.”

LS Electric’s third-quarter revenue this year reached 1.878 trillion won, a 54.4% increase year-over-year. Operating profit rose 131.7% year-over-year to 234 billion won. Revenue and operating profit exceeded market forecasts by 12.1% and 20.4%, respectively. Compared to the previous quarter, they increased by 19.1% and 30.8%, respectively.

Despite unfavorable conditions such as the strong won and a reduction in operating days, the company’s core power business drove earnings growth. While revenue and profit in the power equipment division stagnated due to exchange rate fluctuations, revenue in the power infrastructure division rose significantly. Analysts note that the power infrastructure business maintained high profitability by actively managing foreign exchange risks.

Orders, which will underpin future earnings growth, are also rising rapidly. LS Electric’s cumulative order intake for the first three quarters of this year reached 4.7626 trillion won, already exceeding last year’s total annual order intake by 28%. More than half of the total orders are for data center-related projects.

Since data center-related orders typically take a relatively short time to be recognized as revenue after signing a contract, they are expected to contribute to short-term earnings improvement. The growing number of new clients, particularly among global big tech companies, is also a positive sign.

The expansion of sales in the U.S. market is also noteworthy. SamsungSecurities forecasts that LS Electric’s U.S. sales this year will triple compared to last year. The company is expanding the production capacity of its domestic subsidiary, LS Power Solutions, while simultaneously establishing local production facilities in Utah and Texas.

An analyst explained, “More than half of the cumulative orders secured in the third quarter are data center projects with short lead times until revenue recognition,” adding, “The risk of a downward revision to the short-term profit outlook is limited.”

The assessment is that the stock’s high valuation relative to competitors can be justified given its earnings growth trend. LS Electric has recently posted operating profits that met or exceeded market expectations for four consecutive quarters. Operating profit forecasts for this year and next are also being significantly revised upward compared to those of competitors.

One analyst added, “Since the restructuring of low-margin businesses, the acquisition of new customers, and the expansion of production capacity are proceeding as planned, the visibility for medium- to long-term growth is high,” noting, “Although we have lowered the target stock price, there is still ample room for upside.”