Brokerage : Hana Securities
Analyst : Woonsam Chae
Investment Rating : BUY (Maintain)
Target Price : KRW 710,000 (Upward)
Core Momentum : Severe supply bottlenecks and high costs for US Patriot systems driving global demand for Cheongung-II, supported by a KRW 26.2T order backlog anchoring multi-year earnings compounding through 2028
1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Rating BUY (Maintain), 12-Month Target Price KRW 710,000 (Raised by 26.3% from previous target), Current Price KRW 509,000 (As of February 27, 2026)
- Valuation Methodology: Target price raised to KRW 710,000 by applying a Target P/E multiple of 41x to the 2026 estimated EPS of KRW 16,817
- Financial Forecasts & Historicals:
- 2023: Revenue KRW 2,308.6 Billion, Operating Profit KRW 186.4 Billion, Pre-tax Profit KRW 185.0 Billion, Net Profit KRW 175.0 Billion, EPS KRW 7,953 (Growth +42.32%), PER 16.41x, PBR 2.71x, EV/EBITDA 10.58x, ROE 17.61%, BPS KRW 48,076, DPS KRW 1,950
- 2024: Revenue KRW 3,276.3 Billion, Operating Profit KRW 229.8 Billion, Pre-tax Profit KRW 209.6 Billion, Net Profit KRW 221.7 Billion, EPS KRW 10,078 (Growth +26.72%), PER 21.88x, PBR 3.99x, EV/EBITDA 15.51x, ROE 19.59%, BPS KRW 55,272, DPS KRW 2,400
- 2025P: Revenue KRW 4,307.0 Billion, Operating Profit KRW 322.9 Billion, Pre-tax Profit KRW 314.0 Billion, Net Profit KRW 249.6 Billion, EPS KRW 11,346 (Growth +12.58%), PER 37.11x, PBR 6.54x, EV/EBITDA 20.32x, ROE 19.04%, BPS KRW 64,339, DPS KRW 2,950
- 2026F: Revenue KRW 4,822.6 Billion, Operating Profit KRW 425.4 Billion, Pre-tax Profit KRW 421.6 Billion, Net Profit KRW 370.0 Billion, EPS KRW 16,817 (Growth +48.22%), PER 30.27x, PBR 6.51x, EV/EBITDA 20.93x, ROE 23.65%, BPS KRW 78,226, DPS KRW 4,199
- Consensus Estimates: 2025 Revenue KRW 4,122.0 Billion / Operating Profit KRW 350.5 Billion / Net Profit KRW 297.3 Billion / EPS KRW 14,123 / BPS KRW 66,983; 2026 Revenue KRW 4,937.7 Billion / Operating Profit KRW 435.3 Billion / Net Profit KRW 352.0 Billion / EPS KRW 16,383 / BPS KRW 77,961
- Stock Metrics: KOSPI 6,244.13pt, 52-Week High/Low KRW 631,000 / KRW 239,000, Market Cap KRW 11,198.0 Billion, Market Cap Weight 0.22%, Outstanding Shares 22,000.0 Thousand shares, 60-Day Avg Daily Volume 153.8 Thousand shares, 60-Day Avg Daily Trading Value KRW 72.2 Billion, Foreign Ownership 28.55%, Major Shareholders LIG & 8 affiliated parties (38.21%), National Pension Service (8.66%)
2. [Market Opportunities & Business Outlook]
- Backlog-Driven Earnings Growth Through 2028:
- Robust order backlog of KRW 26.2 Trillion (securing over 6 years of forward revenue) ensures consecutive record annual operating profits through at least 2028.
- Full-scale revenue recognition of the high-margin ~KRW 10.2 Trillion Middle East backlog begins this year. UAE Cheongung-II exports will lead 2026 growth, while earnings contributions from Saudi Arabia and Iraq are projected to expand significantly in 2027 and 2028.
- Low-margin development contracts (BEP level) account for only KRW 5.3 Trillion, whereas domestic mass production (KRW 6.6 Trillion) and other exports (KRW 4.2 Trillion) ensure sustained expansion in absolute operating profit.
- Structural Bottlenecks for US Patriot & Cheongung-II Advantage:
- Escalating regional conflicts in the Middle East have accelerated interceptor inventory depletion.
- Lockheed Martin’s THAAD (annual capacity ~96 units, unit cost ~USD 12.7M) and Patriot PAC-3 MSE (annual capacity ~600 units, unit cost ~USD 4.0M) face acute production constraints and prohibitive price tags.
- Korea’s Cheongung-II interceptor is priced at less than half the cost of Patriot with competitive delivery timelines, establishing itself as the premier medium-tier complement to Patriot air defense systems.
- Aligns with Middle Eastern efforts to diversify procurement away from sole reliance on the US (e.g., UAE deploying Cheongung-II alongside Patriot, with enhanced Korea-UAE defense ties boosting additional contract visibility).
Editor’s Comment (Perspective)
The covering analyst views LIG D&A not through the lens of short-term valuation multiples, but as a premier global defense contractor capitalizing on severe US interceptor production bottlenecks (Patriot PAC-3 shortages) with exceptional cost competitiveness and rapid delivery execution. This perspective emphasizes that the massive KRW 26.2 Trillion backlog (over 6 years of visibility) and sequential revenue recognition across KRW 10.2 Trillion in Middle Eastern programs (UAE in 2026, Saudi Arabia and Iraq in 2027–2028) will rapidly alleviate multiple expansion concerns through robust earnings growth.
To verify whether this investment thesis continues to materialize, primary focus should be directed toward the execution pace of UAE Cheongung-II export revenues in 2026, the scheduled production ramp-ups for Saudi Arabia and Iraq heading into 2027–2028, and additional international contract awards stemming from strengthened Korea-UAE defense cooperation. These operational milestones can be monitored through upcoming quarterly earnings releases, corporate IR disclosures, contract award filings, and official periodic reports.
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