Money Today Reporter Kim Ji-hoon | 2024.03.20 05:27
[밸류업 대해부](18) ‘Pungsan’, the leader in domestically produced 155mm guns
Editor’s note | With the introduction of the government’s value up program, there are predictions that Korea’s discount will actually move to a premium. If chronic problems such as salty dividends, reorganization of governance structure unfavorable to minority shareholders, and unfavorable stock price selection as value traps are resolved, the intrinsic value of Korean companies will be re-examined and the level of stock prices are raised to a higher level. We will closely analyze the current status and discount factors of industry value stocks that will be recognized for their new value.
Minister of National Defense Shin Won-sik said at a press conference last month, “Although North Korea’s military factories are operating at a low rate, weapons production factories supplied to Russia are operating at full capacity.” At the time, Minister Shin also presented an estimate that the number of containers of North Korean artillery shells that had crossed into Russia totaled around 6,700. It was also reported in foreign media that the domestic 155 mm (mm) artillery shells imported by the United States from Korea and supplied to Ukraine last year exceeded the supply of all European countries combined. There will surely be signs of a worldwide shortage of artillery shells. As the Russo-Ukrainian war drags on, so does the importance of artillery shells. There is a domestic company that is attracting attention because of this. Poongsan is a company that exclusively manufactures various artillery shells, including 155 mm, in Korea. Despite speculation in the securities market that dividends per share will increase by 20% and that profits in the hundreds of billions of money earned will be generated due to business relocation, the company is evaluated as a representative low PBR (price-to-book ratio) company.
━
A unique production company of Korean artillery shells during the ‘Russia-US’ war… Will it rise to the range of 60,000 won?
━
On the 19th, on the KOSPI, Poongsan closed at 47,650 won, up 0.11% from the previous day. This is a 50% increase from 31,750 won on October 4 last year, but the stock price is forecast to rise another 30% to 63,000 won, according to the securities industry. However, the PBR is no more than 1x (0.71x). This means it is still undervalued. Poongsan’s main businesses are twofold. It is divided into the Shindong business, which sells plates, bars, rods, wires, lead frames, and sparks made by processing copper and copper alloy, and the defense business, which sells ammunition. Among these, Shindong’s business depends on the price of copper.
On the other hand, geopolitical tensions and defense policies affect the business of the defense industry. Based on its geopolitical location, Korea is an ‘artillery powerhouse’ with the world’s third largest number of self-propelled guns. And Poongsan is the only artillery manufacturing company in Korea. Performance in the domestic market is somewhat guaranteed. The recent K-defense boom that has been blowing around the world is good news. When ground weapons such as self-propelled artillery are sold abroad, Poongsan artillery shells are also packaged.
In particular, securities companies are paying attention to Poongsan in connection with the prolongation of the Russia-Ukraine war, which began with the Russian attack on Ukraine in February 2022. There is an opinion that Poongsan is gaining momentum as the phenomenon of ‘munitions shortage’ ‘ worsen to the extent that even the United States, which supports Ukraine, is having problems supplying shells. Conventional weapons, including artillery shells, are known to be used rapidly on the battlefield between Russia and Ukraine.
━
This year, defense industry sales will increase by 18%… Plan to double artillery production
━
[하르키우=AP/뉴시스] On March 18, 2024 (local time), a prosecutor investigating war crimes in Russia examines fragments of Russian military missiles in Kharkiv, Ukraine. 2024.03.19. /Photo = Min Gyeong-chan In a public announcement last month, Poongsan presented separate sales guidance this year as KRW 3.3 trillion, an increase of 4.7% from the previous year. In particular, sales of the most profitable defense industry export business are expected to increase to 586 billion won, an increase of 17.7% from the previous year.
Total defense industry sales are expected to be 1.115 trillion won. In the case of defense industry sales, starting from KRW 605.2 billion in 2019, it continues to grow from KRW 707.4 billion in 2020 → KRW 740 billion in 2021 → KRW 900.9 billion in 2022 → KRW 989.6 billion in 2023.
In addition, it is known that Poongsan plans to expand its defense industry division by successively expanding its production capacity of 155mm artillery shells to double the current level over the next two years due to the demand for new products (155mm extended range bullets) and more exports. .
Korea Investment & Securities suggested a target price of 60,000 won for Poongsan and analyzed, “Bullets and artillery shells are conventional weapons systems, and we will not expand capacity unless there is a demand base,” and “a growth cycle is only halfway the defense industry. through.”
━
Increase dividend by 20% and dividend payout ratio to 20%… The one-time profit is expected to be hundreds of billions of money gained due to the development of Busan Centum District 2
━
Poongsan’s key indicators (separate basis, earnings per share on consolidated basis) last year Poongsan raised its dividend per share by 20% to 1,200 won. The dividend payout ratio is expected to reach 20% by next year. The securities market also believes that Poongsan’s recent decision to relocate its Busan factory through an MOU (business agreement) with Busan City will have a positive impact on shareholder returns.
This MoU is linked to the agenda of moving the Poongsan factory in the area to another location in order to start construction of the Centum District 2 project in Busan. Considering Busan City’s will to pursue the project, it is very likely that Poongsan will receive land purchase funds this year.
Currently, the book value of the site is less than 200 billion won. However, when estimating the price increase due to the development of ‘Centum 2 District’, the assessed amount is expected to be more than 800 billion won. SK Securities Research Center presented Poongsan’s target price at 63,000 won and analyzed, “After the disposal proceeds are reflected, there is a high possibility of improving corporate value through expanded shareholder returns and new business investments.”
[저작권자 @머니투데이, 무단전재 및 재배포 금지]
#Cannonballs #burn #RussiaRussia #war.. #Korean #monopoly #benefits #increase
