Brokerage : Daishin Securities
Analyst : Jeonghwan Cho, CFA
Investment Rating : BUY (Maintain)
Target Price : KRW 1,100,000 (Maintain)
Core Momentum : Strong 1Q26 operating profit surprise driven by high-margin UAE Cheongung-II maintenance and spare parts, with accelerated growth post-2027 anchored by three Middle Eastern contracts
1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Rating BUY (Maintain), 6-Month Target Price KRW 1,100,000 (Maintain), Current Price KRW 866,000 (As of May 7, 2026), Upside Potential 27.0%
- Valuation Methodology: Target price derived by applying a Target P/E multiple of 31.5x (a 25% premium to the global defense/radar peer 24MF P/E) to the 2027 estimated controlling net profit of KRW 770 Billion (Target Market Cap KRW 24,267 Billion based on 22,000 Thousand shares)
- Financial Forecasts & Historicals:
- 2024A: Revenue KRW 3,276 Billion, Operating Profit KRW 230 Billion, Pre-tax Profit KRW 210 Billion, Total Net Profit KRW 217 Billion, Controlling Net Profit KRW 222 Billion, EPS KRW 10,106, P/E 18x, BPS KRW 56,248, P/B 15x, ROE 17.5%
- 2025A: Revenue KRW 4,307 Billion, Operating Profit KRW 321 Billion, Pre-tax Profit KRW 278 Billion, Total Net Profit KRW 237 Billion, Controlling Net Profit KRW 253 Billion, EPS KRW 11,516, P/E 28x, BPS KRW 67,077, P/B 13x, ROE 16.1%
- 2026F: Revenue KRW 5,607 Billion, Operating Profit KRW 466 Billion, Pre-tax Profit KRW 459 Billion, Total Net Profit KRW 366 Billion, Controlling Net Profit KRW 385 Billion, EPS KRW 17,507, P/E 49x, BPS KRW 79,901, P/B 11x, ROE 20.8%
- 2027F: Revenue KRW 7,124 Billion, Operating Profit KRW 807 Billion, Pre-tax Profit KRW 850 Billion, Total Net Profit KRW 725 Billion, Controlling Net Profit KRW 770 Billion, EPS KRW 35,017, P/E 25x, BPS KRW 105,725, P/B 8x, ROE 31.2%
- 2028F: Revenue KRW 7,589 Billion, Operating Profit KRW 833 Billion, Pre-tax Profit KRW 868 Billion, Total Net Profit KRW 740 Billion, Controlling Net Profit KRW 786 Billion, EPS KRW 35,733, P/E 24x, BPS KRW 131,046, P/B 7x, ROE 25.5%
- Stock Metrics: KOSPI 7,490.05pt, Market Cap KRW 19,052 Billion, Market Cap Weight 0.35%, Capital Stock KRW 110 Billion, 52-Week High/Low KRW 1,020,000 / KRW 336,500, 120-Day Avg Daily Trading Value KRW 216.7 Billion, Foreign Ownership 23.67%, Major Shareholders LIG & 8 affiliated parties (38.21%), National Pension Service (9.7%)
2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Consolidated revenue reached KRW 1,167.9 Billion (+28.7% YoY) and operating profit recorded KRW 171.1 Billion (+56.1% YoY, OPM 14.7%).
- Revenue was slightly below internal estimates (KRW 1,189.0 Billion), while operating profit significantly beat both forecasts (KRW 126.0 Billion) and market consensus.
- Export mix stood at 34.7%, with profitability driven by high-margin UAE Cheongung-II maintenance and spare parts revenues. In addition to KRW 170.0 Billion from UAE Cheongung-II, other export revenues of ~KRW 230.0 Billion were primarily driven by missile systems across the Middle East and other client nations. Ghost Robotics posted an operating loss of KRW 13.0 Billion.
- 2026 Earnings Profile:
- Export revenues are projected to increase in 2H26 driven by UAE and Saudi Arabia Cheongung-II deliveries.
- However, full-year operating margins are expected to trend downward in 2H due to seasonal provisions associated with new domestic contract awards concentrated in 4Q26.
- Long-Term Growth & Pipeline Diversification:
- Simultaneous revenue recognition from UAE, Saudi Arabia, and Iraq contracts starting post-2027 is projected to propel 2027 export revenue to KRW 3.1 Trillion (+68.9% YoY), raising export contribution to 43.3%.
- Product portfolio is expected to broaden from Cheongung-II to advanced systems including L-SAM and LAMD.
Editor’s Comment (Perspective)
The covering analyst views LIG D&A not through the lens of near-term second-half margin moderation driven by domestic contract provisioning, but as a premier defense contractor entering a structural earnings compounding phase supported by acute global interceptor shortages and secured Middle East backlogs. This perspective emphasizes the demonstrated profitability from high-margin maintenance revenues (overcoming slight top-line shortfall in 1Q), the jump in export mix to 43.3% by 2027, and long-term portfolio diversification into next-generation systems like L-SAM and LAMD over quarterly delivery seasonality.
To verify whether this investment thesis continues to materialize, primary focus should be directed toward the execution pace of UAE and Saudi Arabia Cheongung-II deliveries in 2H26, the scale of domestic project provisions in 4Q26, and the simultaneous revenue recognition across UAE, Saudi Arabia, and Iraq contracts post-2027 alongside international pipeline expansion for L-SAM and LAMD. 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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