Stocks affiliated to Korea’s LG Group are headed northbound on expectations for infrastructure demand in the United States and the Middle East, industry watchers note.

LS Group, Korea’s 16th largest company by asset, has seen its earnings fall since 2011 due to depressed cable and copper refining businesses that generate more than half of its sales.

But it would see its fortunes reverse from next year as incoming administration of Donald Trump promises of $1 trillion infrastructure spending to bump up the pace of U.S. economic growth to 3 percent to 4 percent, and the oil industry is on a rebound following the decision by the members of oil cartel Organization of the Petroleum Exporting Countries (OPEC) to cut output. .

“Despite LS Corp.’s worse-than-expected operating profit of 88.5 billion won ($75 million) in the third quarter this year, its share price target has been revised upward from 71,000 won to 75,000 won as its U.S. subsidiary Superior Essex Inc. (SPSX) and tractor making unit LS Mtron would benefit from infrastructure demand,” said Park Won-jae from Mirae Asset Daewoo Securities Co.

LS Group itself pins high hopes on SPSX, a company that LS Cable & System acquired in 2008. SPSX had the largest market share of 18 percent in the communication cable market in North America and 9 percent in the global market as of last year. SPSX would benefit from Trump’s inward trade policies that would disadvantage offshore rivals such as France-based Nexans and Italia-based Prysmian Group. The stock price of LS, LS Group’s holding company, gained 20.9 percent as of Monday from Nov. 9 U.S. presidential election day.

The group’s outbound policy would reap fruit, watchers say. Its sales share in the Korean market declined from 68 percent in 2014 to 54 percent in the third quarter ended September this year while those in the U.S. market rose from 17 percent to 24 percent and in the Chinese market from 4 percent to 8 percent over the same period.

The group is expected to benefit from OPEC’s recent agreement to jointly scale back yield to help restore prices of crude. The Middle Eastern producers will likely revive investments once demand and prices pick up.

The group’s poor balance sheet, however, would weigh over its rosier business outlook. Its net debt snowballed from 1.57 trillion won in 2007 to 5.59 trillion won in 2011 due to equity investment in SPSX and surging price of electrolytic copper. Although the figure was reduced to 4.82 trillion won as of the end of last year, the company won’t be able to dramatically pull down its debt ratio unless profit jumps at its key subsidiaries.

As of 13:30 on Tuesday, shares of LS rose 5.34 percent to 65,100 won in Seoul trading.

By Yoon Jin-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]