LS Group Fell from KRW 600,000 to KRW 300,000... Target Price Finally Cut

[Financial News] LS Group, which rose to KRW 600,000 in May after being grouped with power-related stocks, remains stuck in the KRW 300,000 range. Securities analysts are now cutting their target prices as well.
Choi Kwan-soon, an analyst at SK Securities, said on the 11th, "LS Group's earnings are expected to continue improving in the second half, led by LSCUS and the LS ELECTRIC business." However, reflecting a valuation adjustment resulting from the decline in LS ELECTRIC's share price, he lowered the target price to KRW 540,000.
Choi said, "LS ELECTRIC's portfolio expansion from distribution to transmission is effective. Operating profit in the third quarter is expected to reach KRW 185.2 billion, up 3.8% from the previous quarter." He added, "For LSCUS, sales and profitability are expected to continue improving in underground cables and bus ducts, while sales to TenneT will begin in the fourth quarter."
He forecast that the performance of major subsidiaries would also improve in the second half as demand for power infrastructure expands. Choi estimated LS Group's consolidated operating profit for the second half at KRW 925.4 billion, up 2.8% from the record performance posted in the first half.
From a corporate-value perspective, attention is focused on the value of LSCUS and LS Group's net asset value (NAV) discount. LSCUS is an unlisted company traded on the over-the-counter K-OTC market, with a market capitalization of approximately KRW 3.4 trillion. By contrast, the value of LS Group's stakes in listed companies, including Gaon Cable, LS Eco Energy, and LS Marine Solution, totals approximately KRW 8.6 trillion.
SK Securities values LSCUS by reflecting its K-OTC price, but it analyzed that LS Group's current NAV discount stands at 55.6%, higher than the post-2024 average of 53%. Choi commented, "Given that the company is recording its highest-ever earnings, the current discount is burdensome."
The cancellation of treasury shares could also become an additional catalyst for the share price, the analyst said. LS Group holds treasury shares equivalent to 12.3% of its total shares outstanding. Of this amount, 1.2% is tied to exchangeable bonds, while 11.1% is subject to cancellation. The company canceled 1.6% each in August last year and February this year, but the timing of the next cancellation has not been determined. However, under the revised Commercial Act, treasury shares subject to cancellation must be canceled by September 2027, which could make them a future catalyst for the share price.
Choi said, "Favorable industry conditions continue in major businesses, including cables, I&D, and LS ELECTRIC." He added, "There is significant upside potential because the high discount could narrow through the cancellation of treasury shares." Explaining the KRW 540,000 target price, he said, "We reflected a valuation adjustment resulting from the decline in LS ELECTRIC's share price," adding, "Considering favorable industry conditions and rising copper prices, further gains are possible."
[email protected] Han Young-jun Reporter