Brokerage : Eugene Investment & Securities
Analyst : Seungyun Yang
Investment Rating : BUY (Maintain)
Target Price : KRW 1,040,000 (Maintain)
Core Momentum : Massive 1Q26 earnings beat driven by high-margin non-Cheongung exports (Raybolt, Poniard, Chiron), supported by a KRW 4T non-Cheongung backlog and expanding pipelines including US Poniard and European markets
1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Rating BUY (Maintain), Target Price KRW 1,040,000 (Maintain), Current Price KRW 866,000 (As of May 7, 2026)
- Forecast Adjustments: 2026E operating profit slightly adjusted to KRW 421 Billion (from KRW 431 Billion); 2027E operating profit adjusted to KRW 596 Billion (from KRW 613 Billion)
- Financial Forecasts & Historicals:
- 2025A: Revenue KRW 4,307 Billion, Operating Profit KRW 319 Billion, Pre-tax Profit KRW 278 Billion, Net Profit KRW 237 Billion, EPS KRW 11,516 (Growth +15.5%), PER 36.6x, ROE 19.2%, PBR 6.5x, EV/EBITDA 22.9x
- 2026E: Revenue KRW 4,992 Billion, Operating Profit KRW 421 Billion, Pre-tax Profit KRW 390 Billion, Net Profit KRW 310 Billion, EPS KRW 14,682 (Growth +27.5%), PER 59.0x, ROE 20.7%, PBR 11.3x, EV/EBITDA 35.6x
- 2027E: Revenue KRW 6,023 Billion, Operating Profit KRW 596 Billion, Pre-tax Profit KRW 550 Billion, Net Profit KRW 468 Billion, EPS KRW 22,348 (Growth +52.2%), PER 38.8x, ROE 25.8%, PBR 9.0x, EV/EBITDA 26.3x
- Stock Metrics: Market Cap KRW 19,052 Billion, Outstanding Shares 22,000 Thousand shares, 52-Week High/Low KRW 1,118,000 / KRW 326,500, 52-Week Daily Beta -0.52, 60-Day Avg Daily Trading Value KRW 376.8 Billion, Foreign Ownership 0.0%, Dividend Yield (2026E) 0.3%, Major Shareholders LIG & 9 affiliated parties (38.2%), National Pension Service & 1 affiliated party (9.7%)
2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Consolidated revenue reached KRW 1,167.9 Billion (+29% YoY) and operating profit recorded KRW 171.1 Billion (+56% YoY, OPM 14.7%), significantly beating market consensus (KRW 117.3 Billion) and internal forecasts (KRW 120.0 Billion).
- Total export revenue reached KRW 405.2 Billion. Excluding KRW 170.0 Billion from UAE Cheongung-II (early delivery of 30 interceptors plus follow-on support), remaining exports of KRW 235.0 Billion were driven by non-Cheongung systems including Hyungung (Raybolt), Bigung (Poniard), and Shingung (Chiron).
- High-margin non-Cheongung systems—benefiting from minimal customization and high manufacturing maturity—served as the core profitability driver, backed by a stable non-Cheongung backlog of ~KRW 4 Trillion.
- Market Misperceptions & Post-Earnings Dip:
- Despite the substantial earnings beat, share price fell 12% following the maintenance of the full-year OPM guidance at 7%, conservative communication on new awards/CapEx, and continued operating losses at Ghost Robotics.
- Long-Term Growth Catalysts:
- Broadening pipeline opportunities including US Bigung (Poniard), additional Middle East Cheongung orders, European defense market penetration, and Haegung (K-SAAM) exports.
- Sequential margin expansion expected as Saudi Arabia and Iraq programs commence following the UAE baseline contract.
Editor’s Comment (Perspective)
The covering analyst views LIG D&A not as an enterprise constrained by conservative management communication or unadjusted full-year guidance (7%), but as an agile defense leader proving structural profitability through its mature, high-margin non-Cheongung portfolio (Raybolt, Poniard, Chiron). This perspective places primary importance on the steady ~KRW 4 Trillion non-Cheongung backlog, significant international expansion opportunities (US Poniard, Europe, Middle East follow-ons), and margin enhancement in future Saudi and Iraq deliveries over short-term market overreactions.
To verify whether this investment thesis continues to materialize, primary focus should be directed toward the revenue recognition pace across the KRW 4 Trillion non-Cheongung backlog, contract execution milestones for US Poniard and Middle East/European air defense tenders, and operational margin improvements as Saudi and Iraq Cheongung programs enter mass production. 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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