Yuanta Securities announced on August 7 that LIG Defense and Aerospace is expected to benefit from the expansion of the global air defense missile market, maintaining a 'buy' rating and a target price of 1,050,000 won. The previous day's closing price was 702,000 won, indicating a potential upside of about 50%.
Baek Jong-min, a researcher at Yuanta Securities, stated, "In the second quarter, consolidated revenue was 1.111 trillion won, and operating profit was 105.7 billion won. While these figures slightly fell short of market expectations, they represent year-on-year increases of 17.4% and 29.6%, respectively, indicating solid growth."
The slowdown in performance compared to the previous quarter is attributed to the diminishing impact of early deliveries of the Cheongung II system to the United Arab Emirates (UAE) in the first quarter. Revenue from Cheongung II was approximately 170 billion won in the first quarter, but it dropped to 99 billion won in the second quarter due to the progress-based revenue recognition. Changes in product composition due to the conclusion of some high-margin export projects also played a role.
Yuanta Securities has revised its annual operating profit margin (OPM) forecast for this year from 7% to 8%. This adjustment reflects a reduction in losses from Ghost Robotics and accounts for uncertainties related to increased research and development costs. Analysts believe that actual results may exceed the company's guidance.
Particularly noteworthy is the rising demand for the Cheongung II system. During the earnings announcement, the company indicated that supply is not keeping pace with demand. Negotiations for procurement are ongoing with several countries, including those in the Middle East and Southeast Asia, following the recent regional tensions. The planned expansion of production facilities, set to be completed by 2028, is also a measure to address new demand.
Baek added, "The U.S. Department of Defense's plans to expand the Patriot (PAC-3) and Terminal High Altitude Area Defense (THAAD) systems are exacerbating the global shortage of air defense missiles. We expect contracts for Cheongung II in the Middle East and Southeast Asia to materialize as early as the second half of this year."
* This article has been translated by AI.
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