LS (006260.KS) surged nearly 14% during intraday trading on the 18th, as confirmed margin improvements at LS Cable & System and expanded earnings power at LSMnM prompted a wave of target price hikes from brokerages.
According to the Korea Exchange, LS shares were trading at 538,000 won as of 1:38 p.m., up 65,500 won, or 13.86%, from the previous session.
The direct catalyst behind the rally was the company's first-quarter results. LS reported consolidated first-quarter operating profit of 476.1 billion won, up 56.3% year-on-year and 86.5% quarter-on-quarter. The figure exceeded market consensus by 28.2%. "The margin improvement at LS Cable & System, the swing to profit in the communications cable segment, and the confirmed earnings power at LSMnM are all very positive," said Jang Jae-hyuk, an analyst at Meritz Securities.
LS Cable & System is at the core. The unit posted first-quarter consolidated operating profit of 97.1 billion won, up 16.9% year-on-year and 185.4% quarter-on-quarter. Notably, the operating profit margin (OPM) on subsea cables exceeded 15%, demonstrating the effect of selective order-taking. Underground cables and bus ducts also delivered strong margins of about 7% and over 15%, respectively. High-margin sales to Europe began to be recognized in earnest, and the communications cable segment — which had recorded annual losses of around 20 billion won — turned profitable in April, a factor cited as supporting further upward revisions in estimates.
LSMnM also emerged as a re-rating candidate. The unit's first-quarter consolidated operating profit reached 189.6 billion won, approaching its full-year 2024 operating profit of 224.8 billion won. The result reflects a "metal gain" effect from rising prices of gold, silver, and copper, combined with strong byproduct prices. Meritz Securities said that while some of the metal gain is expected to fade in the second quarter, leading to a quarter-on-quarter decline, the surge in sulfuric acid prices means earnings power has strengthened on a year-on-year basis.
Brokerages have followed up with successive target price hikes. Meritz Securities raised its target price for LS to 640,000 won from 500,000 won and maintained a "buy" rating. Shinhan Securities, DB Securities (016610.KS), and NH Investment & Securities (005940.KS) each set their target price at 600,000 won on the same day.
DB Securities highlighted that the earnings improvement is not confined to subsea cables. The brokerage forecast LS's full-year consolidated operating profit at 1.902 trillion won, up 80.7% year-on-year. Subsea cables are seeing both top-line and margin improvements as revenue recognition begins on the project for TenneT, the Dutch state-owned transmission grid operator, while extra-high-voltage cables, bus ducts, and medium- and low-voltage cables are emerging as new growth pillars on the back of global data center construction and U.S. cable replacement demand. "A new investment point has emerged, shifting from European subsea cables to U.S. distribution cables and extra-high-voltage cables," said Ahn Hoe-soo, an analyst at DB Securities.
