Street Calls of the Week
On Monday, UBS initiated coverage of LS Electric Co Ltd (010120:KS) with a Neutral rating and a price target of KRW213,000. The new rating is based on the company’s potential for long-term growth in the electrical equipment sector. However, UBS analysts pointed out that LS Electric’s limited exposure to large power transformers, which are anticipated to be a significant earnings driver in 2025, influenced the decision not to issue a Buy rating.
The company’s business portfolio is heavily inclined towards medium and low-voltage applications. These are closely tied to the capital expenditure of Korean companies in key industries like semiconductors and battery manufacturing. UBS has adopted a cautious stance on the industrial capital expenditure in the short term, suggesting it could negatively impact LS Electric’s performance.
Despite acknowledging that LS Electric could benefit from the expansion of data centers at major cloud service providers, UBS analysts believe that the company is still in the early stages of customer penetration in this area. The report also noted that the potential for growth in the data center segment appears to be already factored into the stock’s valuation. According to UBS, LS Electric’s stock is currently trading at a premium compared to its Korean peers and aligns with the valuation of its global counterparts, following its year-to-date outperformance.
The UBS report highlights a conservative outlook for LS Electric in the near term, with the expectation that the company’s growth will be tempered by its business focus and market conditions. The Neutral rating reflects a balanced perspective on the company’s prospects, acknowledging both the potential opportunities and the challenges it faces.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.