LG CNS Set to Price IPO at Top of Marketed Range

LG CNS, a leading system integration (SI) company, is gearing up for a significant milestone in its growth trajectory with an initial public offering (IPO) that aims to achieve a valuation of 7 trillion won (approximately $53.8 billion). The company is expected to price its IPO at the top of the marketed range, reflecting its robust financial performance and strategic investments.

LG CNS has demonstrated consistent growth in both sales and net profit. In 2021, the company recorded consolidated sales of 5.6053 trillion won and a net profit of 332.4 billion won, representing year-on-year increases of 13% and 25%, respectively. As of June 2022, the company's net profit stood at 114.8 billion won. This strong financial performance, coupled with the company's stable cash flow and strategic investments in areas such as enterprise resource planning (ERP) and artificial intelligence (AI), has positioned LG CNS well for the upcoming IPO.



The IPO market has been absorbing private equity fund (PEF) exit-driven IPOs since last year, maintaining high expectations for successful transactions. This year, Hyundai Hime and HD Hyundai Marine Solutions successfully entered the stock market through similar transactions. In the demand forecast results, HD Hyundai Marine Solutions set its offering price at the upper end of the desired range, while Hyundai Hime exceeded the upper end, allowing investors Kohlberg Kravis Roberts (KKR) and J& Private Equity to successfully exit their investments.

LG CNS's IPO underwriters, which include multiple domestic investment banks such as KB Securities, Merrill Lynch, and Morgan Stanley, are also a key point of interest. To achieve a valuation of over 7 trillion won while maintaining last year's profit levels, LG CNS would need a price-to-earnings ratio (PER) multiple of over 20 times that of comparable companies. Although the PER of a leading comparable company, Samsung SDS, is around 16 times, LG CNS's strong financial performance and strategic investments position it well to demonstrate high investment value to domestic investors.



Macquarie PEF, which acquired a 35% stake in LG CNS four years ago for 1.019 trillion won, is preparing to exit its investment through this IPO. The anticipated listing valuation of LG CNS is expected to reach 7 trillion won, with Macquarie PEF projected to reduce its ownership ratio from 35% to 21.5% after the public offering. The public offering structure of LG CNS consists of an equal ratio of new share issuance and existing share sales, noted an industry insider.

LG CNS's IPO is expected to be a significant milestone in its growth trajectory, providing the company with additional capital to invest in its business and fund expansion projects. The company's robust financial performance and strategic investments position it well for the upcoming IPO, which is expected to be a successful transaction. The financial community is closely watching whether LG CNS can demonstrate high investment value to domestic investors and achieve a price-to-earnings ratio (PER) multiple of over 20 times that of comparable companies.