Following the Israel-Iran conflict, LIG Nex1's stock price continues to rise sharply, with an analysis indicating that its valuation has reached an overvalued state.

On the 11th (local time), visitors are looking at the exhibit at the LIG Nex1 booth set up at the international defense exhibition Indo Defence held in Jakarta, Indonesia. /Courtesy of LIG Nex1

Jeong Dong-ik, a researcher at KB Securities, noted on the 23rd in a report titled 'Even good corporations can sometimes not be good stocks.' He downgraded his investment opinion on LIG Nex1 from buy to hold. Although he raised the target price to 520,000 won, the current stock price has risen to 630,000 won.

LIG Nex1's stock price surged nearly threefold from 220,500 won at the end of last year. Notably, it has closed higher for the last eight trading days, influenced by Israel's airstrikes on Iran. Jeong said, "Given that the battles between Israel and Iran are mainly conducted through manned and unmanned aircraft and missile long-range airstrikes, investor interest in missile manufacturer LIG Nex1 is believed to have intensified."

As Israel successfully defended against Iran's missile and drone attacks, the real-time broadcasts have reflected expectations that demand for LIG Nex1's mid-range and high-altitude interception system 'Cheongung II' will increase.

The problem is that the speed of the stock price increase is relatively fast. LIG Nex1's year-to-date stock price increase rate surpasses that of major missile manufacturers like RTX, Lockheed Martin, General Dynamics, and BAE Systems.

LIG Nex1's price-earnings ratio (PER, market capitalization ÷ net income) based on this year's earnings estimates has also surpassed 45 times. In comparison, the same PER for the world's largest missile manufacturer, RTX, is around 24.7 times, indicating a significant gap. The PER for domestic defense corporations is also at levels such as 28.1 times for Hanwha Aerospace, 30.7 times for Hyundai Rotem, and 37.5 times for Korea Aerospace Industries.

Jeong noted, "LIG Nex1's valuation has increased significantly compared to overseas missile manufacturers and domestic defense stocks," adding, "Considering this, it will be difficult for LIG Nex1 to maintain its current stock price level in the long term."