🔌 [LS] AI Power Grid Rally and Order Jackpot: Is the Valuation Justified? - 2026.06.09

Hello, this is Peanut, the fundamental/bearish analyst at Bultagi.com.

Today, LS shares closed at 387,000 won, up 4.31% from the previous day. Institutions net bought 8.04 billion won, while foreigners net sold 9.61 billion won, showing mixed supply and demand. With power equipment stocks having undergone a 30% correction over the past month, thorough verification is needed to determine whether today's rebound is a structural uptrend signal or merely a technical bounce.

North American DC Distribution and Backlog: Can the Valuation Be Justified? 💼

The media and the market are cheering for the power supercycle driven by AI data centers. The top three domestic power equipment companies reached an order backlog of approximately 37 trillion won at the end of the first quarter, and LS Electric alone secured a backlog of 5.6425 trillion won, a double-digit increase year-on-year ^[1]. In particular, LS Electric clearly stated its strategy to respond to North American data center demand with high-efficiency direct current (DC) distribution at the Korea-Australia Future Industry Forum ^[2]. While ultra-high voltage transformers have driven growth so far, the shift in demand toward DC distribution and power control systems that reduce power conversion losses is a positive trend ^[1].

But is that really the case? Considering the time lag until orders are recognized as actual revenue and profit, and the continuous CAPEX (capital expenditure) burden to secure local production capacity, it is questionable whether the current valuation is fully justified. The 34.69% drop in LS Electric's stock price over the past month ^[1] is not simply a shift in supply and demand towards semiconductors, but there is a risk that it represents an exodus of smart money concerned about earnings peak-out and rising investment costs.

Middle East DEWA Certification and Subsidiary FI Attraction 📉

Business momentum continues to be added. LS Electric's Power Technology & Testing (PT&T) has been officially registered as an accredited testing laboratory by the Dubai Electricity and Water Authority (DEWA), one of the largest power authorities in the Middle East ^[3]. This will allow essential certification procedures for Middle East exports to be conducted directly in Korea, which is expected to cut the required time by more than half. In addition, there are subsidiary issues affecting the holding company's value. LS Electric is seeking to attract a financial investor (FI) for its robotics affiliate, Tira Robotics, which it controls through its subsidiary LS Tira U-tech ^[4]. The move aims to secure ammunition for the expansion of the smart factory business by selling a portion of the stake without affecting management rights.

However, can it be verified whether these favorable factors will lead to improved cash flows without immediate damage to the holding company's consolidated EPS (Earnings Per Share)? Attracting FIs or raising external funds ultimately means sharing a portion of future profits, which could lead to equity dilution and a holding company discount in the long run, requiring strict vigilance.

Bearish Scenario Behind Global IBs' Optimism ⚠️

Goldman Sachs significantly raised its KOSPI target to 12,000, naming power supply-related stocks as a still undervalued and positive sector, alongside Samsung Electronics and SK Hynix ^[5]. The UK's Financial Times (FT) also highlighted South Korea as an economic winner globally, noting that the combined order backlog of Korean power equipment companies producing ultra-high voltage transformers has reached 32 trillion won due to the AI boom and surging data center demand ^[6].

Although a bullish atmosphere prevails across the market, we must point out a bearish scenario at least once. If a bottleneck in AI infrastructure investment occurs due to a global macro slowdown or prolonged high interest rates, the current massive order backlog could turn into bad inventory or delayed projects. China's pursuit of industrial advancement is also a formidable threat ^[7]. This implies a typical value trap possibility that damages fundamentals.

Therefore, a short-to-mid swing approach is more rational than uncritical long-term holding. In periods of expanding volatility, a conservative stance is required, refraining from blind following and classifying the stock as a profit-taking trim candidate when the price spikes. Peanut believes that the current power grid rally has entered a transition period where it must be proven by actual margin defense and free cash flow (FCF) generation, moving beyond mere expectations.

📰 Reference News (7)

1

Prolonged Consolidation for Power Equipment Stocks... Can They Rebound in H2?

네이버뉴스 · 2026.06.09

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2

LS Electric: "Meeting North American Demand with High-Efficiency DC Distribution" [Han-Ho Forum 2026] - v.daum.net

v.daum.net · 2026.06.09

📰 View original

3

Overcoming Middle East Certification Barriers... LS Electric Registered as DEWA Authorized Testing Lab - HelloT

헬로티 · 2026.06.08

📰 View original

4

LS Electric Seeks FI for Robotics Affiliate... Securing Funds to Strengthen New Businesses [Signal]

네이버뉴스 · 2026.06.09

📰 View original

5

"Still Has a Long Way to Go Up"... Says Goldman Sachs

네이버뉴스 · 2026.06.09

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6

"South Korea a Global Economic Winner Amid Chip, Shipbuilding, and Defense Boom" - FT

네이버뉴스 · 2026.06.09

📰 View original

7

This Korean Company's Stock Surged 50x in 5 Years... Why FT Called the Korean Economy a 'Winner'

네이버뉴스 · 2026.06.09

📰 View original