[Alpha Biz= Kim Eun-mi] A report has lowered the target price for Poongsan Corporation, citing potential divestment of its ammunition business as a key management risk.

According to the financial investment industry on April 14, Samsung Securities reduced its target price for Poongsan by 16% to KRW 140,000, while maintaining a “Buy” rating.

Analyst Baek Jae-seung noted that Poongsan is trading at a price-to-earnings (P/E) ratio of 11.8x—about a 70% discount compared to domestic defense peers—suggesting continued upside potential based on fundamentals. However, recent speculation over a possible sale of its ammunition division has emerged as a management overhang.

“While the company has stated that no such plans are currently underway, effectively calming the issue for now, it appears that a sale may have been considered at some point,” Baek said. “Restoring investor confidence in management may take time.”

The analyst added that the valuation discount applied to the company’s defense business has been widened from 20% to 30%, reflecting heightened uncertainty.

For the first quarter, Poongsan is expected to post revenue of KRW 1.3 trillion and operating profit of KRW 103.1 billion. While revenue is projected to decline 6.5% quarter-on-quarter, operating profit is forecast to rise 13.6%, exceeding market consensus.

Baek explained that although defense exports may weaken due to reduced shipments to Poland, improved margins in the company’s non-ferrous metal segment—driven by higher average copper prices and a stronger U.S. dollar—are likely to support earnings.

He also noted that while copper prices saw some correction following Middle East tensions in March, the won-based copper price trend is expected to remain firm into the second quarter, supported by tight supply of copper concentrates.

Looking ahead, the analyst said that although additional large-caliber ammunition orders remain uncertain, Poongsan’s defense export business is expected to remain stable in the mid- to long term, supported by existing order backlogs.

 

 

 

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