LG CNS, the information technology (IT) subsidiary of the LG Group, is set to begin the process for an initial public offering (IPO), with plans to list on the Korea Exchange (KOSPI) early next year. While the market is estimating LG CNS’s valuation to be around 5 trillion won, the company is expected to aim for a higher figure based on its consolidated revenue and operating profit from last year.
According to the financial investment industry, LG CNS submitted a preliminary listing application to the Korea Exchange (KRX) on Oct. 4.
Considering that the KRX typically announces the results within 45 business days of receiving such applications, the company is expected to complete its listing in the first half of next year. The lead underwriters for the IPO are KB Securities, Bank of America, and Morgan Stanley, with co-managers including Mirae Asset Securities, Daishin Securities, Shinhan Investment Corp., and J.P. Morgan.
LG CNS is reportedly targeting a valuation of up to 8 trillion won ($5.93 billion). The price-to-earnings ratio (PER) is likely to be the primary method used to determine the IPO price of the company. Competitors such as Hyundai AutoEver, Lotte Innovate, and HD Hyundai Marine Solutions, which recently listed on the KOSPI, also used this model. However, given that the PER of its main competitor, Samsung SDS, stands at 16.48 times, it may be challenging for LG CNS to achieve its desired valuation if it only considers domestic companies as peers.
To address this, the underwriters have reportedly included global IT service companies in LG CNS’s peer group, particularly focusing on its digital transformation (DX) and cloud business sectors. Among S. Korean peers, notable companies include Samsung SDS (PER of 16.48 times), Posco DX (55.98 times), and Hyundai AutoEver (29.94 times), all of which are major system integration (SI) subsidiaries of large Korean conglomerates.
On the global stage, potential peer companies include Accenture (PER of 30.28 times), India’s Tata Consultancy Services (32.86 times), HCL Technologies (25.98 times), Infosys (listed on the New York Stock Exchange with a PER of 29.60 times), and France’s Capgemini (19.14 times).
With LG CNS focusing on artificial intelligence (AI), data services, and cloud-based digital transformation, these global IT service providers make suitable peers. Each of these companies operates on a global scale, offering a wide range of IT services.
