Brokerage : iM Securities
Analyst : Yongjin Byun
Investment Rating : Buy (Upgrade)
Target Price : KRW 1,230,000 (Upward)
Core Momentum : Substantial 1Q26 earnings beat driven by UAE Cheongung-II early deliveries, with target price raised by applying a 50x Target P/E to 2028E EPS amid PAC-3 shortages and surging Middle Eastern demand
1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Rating Buy (Upgrade), 12-Month Target Price KRW 1,230,000 (Raised from previous target), Closing Price KRW 866,000 (As of May 7, 2026, printed as 2025.11.06), Upside Potential 42.0%
- Valuation Methodology: Base year shifted from 2027F to 2028F EPS (KRW 25,786) and applied a Target P/E multiple of 50x (the highest multiple among global legacy defense peers)
- Financial Forecasts & Historicals (K-IFRS Consolidated):
- 2025: Revenue KRW 4,307 Billion, Operating Profit KRW 319 Billion (OP Margin 7.4%), Net Profit KRW 253 Billion, EPS KRW 11,516, BPS KRW 65,005, PER 36.6x, PBR 6.5x, ROE 19.2%, Dividend Yield 0.7%, EV/EBITDA 22.5x
- 2026E: Revenue KRW 5,083 Billion, Operating Profit KRW 483 Billion (OP Margin 9.5%), Net Profit KRW 366 Billion, EPS KRW 16,618, BPS KRW 78,399, PER 52.1x, PBR 11.0x, ROE 23.2%, Dividend Yield 0.3%, EV/EBITDA 30.1x
- 2027E: Revenue KRW 5,968 Billion, Operating Profit KRW 605 Billion (OP Margin 10.1%), Net Profit KRW 460 Billion, EPS KRW 20,904, BPS KRW 96,080, PER 41.4x, PBR 9.0x, ROE 24.0%, Dividend Yield 0.3%, EV/EBITDA 25.7x
- 2028E: Revenue KRW 6,463 Billion, Operating Profit KRW 737 Billion (OP Margin 11.4%), Net Profit KRW 567 Billion, EPS KRW 25,786, BPS KRW 118,643, PER 33.6x, PBR 7.3x, ROE 24.0%, Dividend Yield 0.3%, EV/EBITDA 22.2x
- Stock Metrics: Capital Stock KRW 110 Billion, Total Shares 22.0 Million shares, Market Cap KRW 19,052 Billion, Foreign Ownership 23.7%, 52-Week Price Range KRW 336,500 ~ KRW 1,020,000, 60-Day Avg Daily Volume 472,242 shares, 60-Day Avg Daily Trading Value KRW 366.7 Billion
2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Consolidated revenue reached KRW 1,167.9 Billion and operating profit recorded KRW 171.1 Billion (OPM 14.7%), substantially outperforming consensus (KRW 1,091.3 Billion revenue, KRW 117.3 Billion operating profit) and internal forecasts.
- Driven by urgent delivery requests from the UAE amid the Iran-Israel conflict, portions of Korean military-allocated batches were converted to export shipments, enhancing realized pricing and profitability (UAE Cheongung-II sales reached KRW 170.0 Billion).
- Strong results were supported by follow-on contracts for spare parts and higher baseline manufacturing volumes of Cheongung-II missiles.
- Conservative Guidance vs. Market Realities:
- Management maintained conservative full-year OPM guidance (7%), reflecting the geopolitical sensitivity of defense contracts and intergovernmental dynamics.
- However, severe inventory shortages of Patriot PAC-3 systems and reported delivery delays to existing customer nations elevate Cheongung-II as the prime global alternative.
- Global Order Pipeline & Scarcity Value:
- Secured baseline contracts across three key Middle Eastern nations (Saudi Arabia, Iraq, UAE), with fresh inquiries coming in from neighboring Middle Eastern countries.
- Superior manufacturing execution and capacity expansion capabilities relative to Western defense peers position LIG D&A to continuously restock depleted international defense inventories.
Editor’s Comment (Perspective)
The covering analyst views LIG D&A not as a defense supplier constrained by intergovernmental sensitivities or unadjusted conservative annual guidance (7%), but as an indispensable global prime contractor enjoying extreme scarcity value amid severe air defense shortages. With Patriot PAC-3 facing acute inventory depletion and delivery delays, this perspective justifies assigning the top-tier peer multiple of 50x Target P/E to 2028E EPS, emphasizing LIG D&A’s secured client base across three Middle Eastern nations (Saudi Arabia, Iraq, UAE) and expanding inquiries across neighboring regional countries.
To verify whether this investment thesis continues to materialize, primary focus should be directed toward sustaining high export delivery momentum across subsequent quarters, converting inbound Middle Eastern inquiries into formal procurement contracts, and tracking execution on 2028E earnings projections (KRW 737 Billion OP) supported by superior manufacturing ramp-ups. These operational milestones can be monitored through upcoming quarterly earnings releases, corporate IR disclosures, contract award filings, and official periodic reports.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
Investment Risk Notice: This content is provided for informational and linguistic reference purposes only. Under no circumstances does it constitute financial advice or a recommendation to buy or sell any specific securities. All investment decisions and financial responsibilities rest entirely with the investor.
Contact: Compliance and Copyright Inquiries (ksb220805@gmail.com)
