Brokerage : Kiwoom Securities
Analyst : Hangyeol Lee
Investment Rating : BUY (Maintain)
Target Price : KRW 1,350,000 (Maintain)
Core Momentum : High order visibility and CapEx expansion across Gumi and Gimcheon plants anchoring long-term growth, with Saudi Arabia and Iraq Cheongung-II deliveries commencing in earnest from next year
1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Rating BUY (Maintain), Target Price KRW 1,350,000 (Maintain), Current Price KRW 702,000 (As of Aug 6, 2026), Market Cap KRW 15,444.0 Billion
- Financial Forecasts & Historicals (IFRS Consolidated):
- 2024: Revenue KRW 3,276.3 Billion, Operating Profit KRW 223.4 Billion (OP Margin 6.8%), EBITDA KRW 309.1 Billion, Pre-tax Profit KRW 203.2 Billion, Net Profit KRW 212.8 Billion, Controlling Net Profit KRW 219.4 Billion, EPS KRW 9,974 (YoY +25.4%), PER 22.1x, PBR 4.01x, EV/EBITDA 15.6x, ROE 19.4%, Net Debt Ratio -6.3%
- 2025: Revenue KRW 4,306.9 Billion, Operating Profit KRW 319.4 Billion (OP Margin 7.4%), EBITDA KRW 443.6 Billion, Pre-tax Profit KRW 278.4 Billion, Net Profit KRW 237.5 Billion, Controlling Net Profit KRW 253.4 Billion, EPS KRW 11,516 (YoY +15.5%), PER 36.6x, PBR 6.48x, EV/EBITDA 23.0x, ROE 19.2%, Net Debt Ratio 60.3%
- 2026F: Revenue KRW 5,106.0 Billion, Operating Profit KRW 436.8 Billion (OP Margin 8.6%), EBITDA KRW 599.7 Billion, Pre-tax Profit KRW 445.8 Billion, Net Profit KRW 347.0 Billion, Controlling Net Profit KRW 378.2 Billion, EPS KRW 17,192 (YoY +49.3%), PER 58.3x, PBR 12.59x, EV/EBITDA 38.3x, ROE 23.8%, Net Debt Ratio 52.9%
- 2027F: Revenue KRW 5,994.9 Billion, Operating Profit KRW 663.9 Billion (OP Margin 11.1%), EBITDA KRW 857.2 Billion, Pre-tax Profit KRW 682.9 Billion, Net Profit KRW 542.9 Billion, Controlling Net Profit KRW 542.9 Billion, EPS KRW 24,676 (YoY +43.5%), PER 40.6x, PBR 9.86x, EV/EBITDA 26.6x, ROE 27.2%, Net Debt Ratio 33.8%
- Stock Metrics: KOSPI 6,296.38pt, Outstanding Shares 22,000 Thousand shares, 3-Month Avg Daily Volume 204 Thousand shares, Foreign Ownership 26.7%, Dividend Yield (2026E) 0.3%, BPS (2026E) KRW 79,567, Major Shareholders LIG & 8 affiliated parties (38.2%)
2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Review:
- Consolidated revenue reached KRW 1,110.1 Billion (+17.4% YoY) and operating profit came in at KRW 105.7 Billion (+29.5% YoY, OPM 9.5%), slightly missing market consensus (KRW 111.0 Billion) and internal forecasts (KRW 107.9 Billion).
- UAE Cheongung-II revenue contributed ~KRW 99 Billion, driving 2Q export sales to KRW 281.8 Billion (+71.1% YoY, 25% of total sales, in line with full-year expectations). Overall export profitability is estimated to exceed 30%.
- Domestic R&D and mass production businesses maintained solid growth. Ghost Robotics recorded an operating loss of ~KRW 12.2 Billion.
- Order Outlook & Production Capacity Expansion:
- Rising geopolitical conflicts in the Middle East have surged demand for air defense systems, with Cheongung-II inquiries expanding across the Middle East, Southeast Asia, and Eastern Europe following proven combat performance.
- Out of the KRW 24.6 Trillion order backlog at 1H26 end, Cheongung-II backlog for three Middle Eastern nations (UAE, Saudi Arabia, Iraq) stands at ~KRW 9.9 Trillion, ensuring deliveries over the next 6-7 years.
- Raised KRW 500 Billion from the National Growth Fund in June to build new production facilities in Gumi and expand the Gimcheon plant, significantly ramping up capacity from 2028.
- Outlook & Catalysts:
- Second-half earnings profile expected to reflect heavier R&D expenditure.
- Starting next year, full-scale deliveries for Saudi Arabia and Iraq will push the export revenue portion above 30%, accelerating structural margin expansion. Additional contract awards expected within the year across the Middle East and Southeast Asia.
Editor’s Comment (Perspective)
The covering analyst views LIG D&A not as a company limited by near-term second-half R&D spending, but as a top-pick defense contractor positioned for multi-year structural compounding driven by proven combat reliability and proactive manufacturing CapEx. This perspective places primary importance on the execution of the KRW 9.9 Trillion Middle East backlog, the commencement of high-margin Saudi and Iraq deliveries next year driving export mix above 30%, and the KRW 500 Billion plant expansion over minor quarterly consensus misses.
To verify whether this investment thesis continues to materialize, primary focus should be directed toward new Cheongung-II contract awards across the Middle East and Southeast Asia within the year, the construction progress of the new Gumi and Gimcheon facilities, and the initial delivery timelines for Saudi Arabia and Iraq starting next year to drive projected 2027F operating margins to 11.1%. 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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