By Jun Ji-hye
Securities firms are rushing to lower their target prices for LIG Nex1, saying it will be difficult for the defense company to bounce back from its disappointing first-half performance amid deteriorating business conditions.
In the April-June period, LIG Nex1 posted 363 billion won ($322 million) in sales with an operating profit of 13.1 billion won. The sales and operating profit fell by 17.3 percent and 47 percent, respectively, from a year ago.
An official from LIG Nex1 said the tough business conditions have continued from the second half of last year.
Shinhan Investment cut its target price for LIG Nex1's stocks to 37,000 won from 52,000 won, Tuesday, attributing the decrease in sales of the company to the end of large-scale operations, including the mass-production of the Cheongung medium-range surface-to-air missiles.
"Allowances to cover losses of some development projects, estimated at about 8 billion won, was also reflected in the firm's second-quarter performance, contributing to the drop," said Hwang Eo-yeon, an analyst from Shinhan Investment.
Hwang said it will be difficult for the defense company to revive its sales within the year as core arms projects have ended.
"LIG Nex1 would be able to make a rebound in the first half of next year at the earliest, when mass-production of the improved version of the Cheongung begins," he said.
Kiwoom Securities issued a similar analysis, saying it may take some time for LIG Nex1 to improve its performance due to a decrease in domestic sales as well as delays in reflecting its sales made from its overseas businesses.
The securities company cut its target price for the defense firm's stocks to 42,000 won from 61,000 won.
"LIG Nex1 was burdened from fixed costs amid a reduction in sales, and its overseas sales have decreased as well," said Lee Chang-hee, an analyst at Kiwoom Securities. "Considering it takes time for sales to be reflected from when a company gets new orders, it would not be easy for LIG Nex1 to improve its profitability soon."
Samsung Securities cut its target price for the defense firm's stocks to 40,000 won from 49,000 won.
LIG Nex1 fell to 51st this year from the 44th last year on the list of global top 100 defense companies, announced Monday by Defense News after its analysis of companies' annual reports.
The company said it plans to enhance its marketing activities in the Middle East, Central and South America and Asia to win overseas contracts. It also plans to participate in global defense exhibitions, scheduled to kick off in the United States, the Philippines and Indonesia in the second half of the year to expand its influence in the overseas market.
The company noted exports have consistently increased, having accounted for 6.1 percent in 2016, 12.5 percent in 2017 and 17.8 percent in the first half of the year.
"With our exports having increased threefold from 2016, we could recover difficulties of the domestic market to some extent," said the company official. "We will concentrate our efforts on the overseas markets to make visible achievements."
The firm's share price dropped 4.59 percent to 32,250 won, Tuesday. The KOSPI closed at 2,258.91, up 10.46 points, or 0.47 percent, from the previous day.
Securities firms are rushing to lower their target prices for LIG Nex1, saying it will be difficult for the defense company to bounce back from its disappointing first-half performance amid deteriorating business conditions.
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| LIG Nex1 CEO Kim Ji-chan |
An official from LIG Nex1 said the tough business conditions have continued from the second half of last year.
Shinhan Investment cut its target price for LIG Nex1's stocks to 37,000 won from 52,000 won, Tuesday, attributing the decrease in sales of the company to the end of large-scale operations, including the mass-production of the Cheongung medium-range surface-to-air missiles.
"Allowances to cover losses of some development projects, estimated at about 8 billion won, was also reflected in the firm's second-quarter performance, contributing to the drop," said Hwang Eo-yeon, an analyst from Shinhan Investment.
Hwang said it will be difficult for the defense company to revive its sales within the year as core arms projects have ended.
"LIG Nex1 would be able to make a rebound in the first half of next year at the earliest, when mass-production of the improved version of the Cheongung begins," he said.
Kiwoom Securities issued a similar analysis, saying it may take some time for LIG Nex1 to improve its performance due to a decrease in domestic sales as well as delays in reflecting its sales made from its overseas businesses.
The securities company cut its target price for the defense firm's stocks to 42,000 won from 61,000 won.
"LIG Nex1 was burdened from fixed costs amid a reduction in sales, and its overseas sales have decreased as well," said Lee Chang-hee, an analyst at Kiwoom Securities. "Considering it takes time for sales to be reflected from when a company gets new orders, it would not be easy for LIG Nex1 to improve its profitability soon."
Samsung Securities cut its target price for the defense firm's stocks to 40,000 won from 49,000 won.
LIG Nex1 fell to 51st this year from the 44th last year on the list of global top 100 defense companies, announced Monday by Defense News after its analysis of companies' annual reports.
The company said it plans to enhance its marketing activities in the Middle East, Central and South America and Asia to win overseas contracts. It also plans to participate in global defense exhibitions, scheduled to kick off in the United States, the Philippines and Indonesia in the second half of the year to expand its influence in the overseas market.
The company noted exports have consistently increased, having accounted for 6.1 percent in 2016, 12.5 percent in 2017 and 17.8 percent in the first half of the year.
"With our exports having increased threefold from 2016, we could recover difficulties of the domestic market to some extent," said the company official. "We will concentrate our efforts on the overseas markets to make visible achievements."
The firm's share price dropped 4.59 percent to 32,250 won, Tuesday. The KOSPI closed at 2,258.91, up 10.46 points, or 0.47 percent, from the previous day.
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