KB Securities noted on the 28th that it expects profitability improvement through direct exports for MNC Solution. It maintained its investment recommendation of 'buy' and raised the target price from the previous 115,000 won to 160,000 won, an increase of 39.1%. The closing price of MNC Solution on the previous trading day was 131,200 won.
Jung Dong-ik, a researcher at KB Securities, believes that MNC Solution will enhance its profitability through direct export contracts for defense parts. Jung noted, “MNC Solution disclosed that it signed a product supply contract with India's L&T on the 19th” and added, “While the absolute amount is not large, it is noteworthy as the first export contract made directly with overseas defense companies without going through prime contractors like Hyundai Rotem or Hanwha Aerospace.”
According to KB Securities, unlike ground system companies that record high operating profit margins of 30% to 40%, MNC Solution’s operating profit margin is around 20%. Ultimately, Jung believes that entering direct exports enables the company to achieve higher profitability than the system companies.
The potential for divestiture is also a positive factor. Jung mentioned, “There were reports that the major shareholder, a private equity fund, is exploring market reactions for a substantial sale in the second half,” and predicted, “If a corporation that can guarantee growth through additional investments enters the market or if competition for acquisition heats up, it will positively impact the stock price.”
Jung projected that MNC Solution will continue to show performance growth this year. He stated, “Given that 80% to 90% of the annual sales come from existing orders, high growth in sales and profits will continue after the second quarter.”
MNC Solution recorded 75.1 billion won in sales and 9.5 billion won in operating profit for the first quarter (January to March) on a separate basis. This represents an increase of 51.7% and 413.2%, respectively, compared to the same period last year.