LS Electric stocks fell 6.67% to 163,800 won on the 29th, marking a 51.10% decline from the May high of 328,500 won, despite announcing record Q2 results on the 23rd with revenue of 1.577 trillion won and operating profit of 178.5 billion won. The stock decline occurred amid valuation concerns, as the company's 12-month forward price-to-earnings ratio reached 38.7 times and price-to-book ratio hit 12.6 times, making it vulnerable to selling pressure during the broader KOSPI correction since May. LS Electric, identified as a major beneficiary of the AI data center boom that led the stock market in the first half, accumulated order backlog approaching 7 trillion won with new orders of 2.0835 trillion won in Q2.
LS Electric Reports Record Q2 Results with 7 Trillion Won Order Backlog
LS Electric announced on the 23rd that it achieved Q2 revenue of 1.577 trillion won and operating profit of 178.5 billion won, exceeding market consensus and marking the company's highest quarterly performance. The company recorded new orders of 2.0835 trillion won, bringing its order backlog to just under 7 trillion won. The annual operating profit consensus for this year stands at 716.5 billion won, representing a 61.04% increase from last year.
Valuation Concerns Drive Stock Decline Despite Strong Fundamentals
Despite the recent correction, LS Electric's 12-month forward price-to-earnings ratio remains at 38.7 times, with a price-to-book ratio of 12.6 times. The stock experienced stronger selling pressure compared to other stocks as the KOSPI index corrected since May, with the company trading at premium valuations relative to its earnings and book value.
Securities Firms Maintain Buy Ratings and Raise Target Prices
All 16 securities firms covering LS Electric maintain buy ratings, with 9 firms raising their target prices within the past week. Na Min-sik, researcher at SK Securities, stated that the lead time for LS Electric's main product, switchboards, is within 10 months, compared to over 2 years typically required for ultra-high voltage transformers for power transmission, allowing faster revenue recognition. Na described LS Electric as "the stock with the highest earnings visibility when compared to competitors in the power equipment sector."
Kim Tae-hyung, researcher at Mirae Asset Securities, noted that LS Electric disclosed 5 hyperscaler orders worth 800 billion won in Q2 alone, stating that "hyperscalers are maintaining an aggressive investment stance." Securities firms explained that power equipment creates bottlenecks in AI data center expansion at levels exceeding memory semiconductors, with demand overwhelming supply.
FAQ
What were LS Electric's Q2 results announced on the 23rd?
LS Electric reported Q2 revenue of 1.577 trillion won and operating profit of 178.5 billion won, exceeding market consensus and marking record quarterly performance. The company recorded new orders of 2.0835 trillion won with order backlog approaching 7 trillion won.
Why did LS Electric stocks decline despite record results?
LS Electric stocks fell due to valuation concerns, with the 12-month forward price-to-earnings ratio at 38.7 times and price-to-book ratio at 12.6 times. The stock experienced stronger selling pressure during the broader KOSPI correction since May as it was trading at premium valuations relative to earnings and book value.
What is the lead time advantage for LS Electric's switchboards?
The lead time for LS Electric's main product, switchboards, is within 10 months, compared to over 2 years typically required for ultra-high voltage transformers for power transmission, allowing faster revenue recognition according to SK Securities.
