NH Investment & Securities raised its target price for LS Corp. (006260.KS) by 50%, reflecting expectations that the value of unlisted subsidiaries will be fully recognized as the government pushes to ban dual listings in principle.
In a report released Tuesday, NH Investment & Securities lifted its target price for LS from 400,000 won to 600,000 won, a 50% increase, while maintaining its "buy" rating. "We expect the value of unlisted subsidiaries to be fully reflected in the holding company's value, driven by the government's push to ban dual listings in principle and LS's efforts to enhance shareholder value," the report said.
LS holds multiple unlisted affiliates, including LS MnM, LS Mtron, LS Power Solution, LS EV Korea and Essex Solutions. Some of them previously received investments from financial investors (FIs) on the premise of future initial public offerings. The market has viewed additional listings of LS affiliates as highly likely. When a parent company and its subsidiary are both listed, it becomes a discount factor for the parent's share price.
Another basis for the target price hike is the surge in the value of LS's stake in LS Electric. The value of LS's holdings in LS Electric rose from 11.6 trillion won on Nov. 6 to 20.2 trillion won on Nov. 30. NH Investment & Securities calculated net asset value (NAV) per share at 920,351 won and applied a 35% discount rate to derive the target price. "The current discount to NAV stands at 50.8%, which still leaves the stock in undervalued territory when considering the value of unlisted subsidiaries," the report said.
LS Cable & System, a core subsidiary, is expected to sustain medium- to long-term growth on expanding global demand for transformers. Analysts said the value chain built around electric vehicle materials could also contribute to revenue growth once the market's growth momentum fully recovers.
