South Korean IT solutions provider LG CNS has emerged as a major initial public offering contender for next year as it began the listing process on the country’s main bourse Kospi earlier this month.

Market watchers estimate the firm’s corporate value to reach around 7 trillion won ($5.14 billion), making it Korea's largest IPO since LG Energy Solution in January 2022. For a successful market debut, it will be crucial for the company to add more corporate clients and improve profits.

Currently, almost 60 percent of its sales come from LG affiliates. The company has continued working to reduce this reliance and secure more deals with public and financial institutions that are speeding up their digital transformation.

LG CNS says the planned IPO is also aimed at diversifying its business portfolio to expand its growth drivers such as the cloud and artificial intelligence sectors.

It launched a 50-50 joint venture with Indonesia’s Sinar Mas Group last month as part of its global expansion efforts. An anonymous industry source said, “The funds raised by going public will be invested in developing new technologies and expanding the company's global business, which will likely increase external business and profitability as the firm gains more market attention.”

After years of record sales, its earnings fluctuated this year, prompting concerns about slowing profitability. In the first half of this year, sales increased by 4.1 percent on-year to 2.52 trillion won, while operating profits fell to 170 billion won, a 4 percent decrease from a year ago.

“LG CNS' sales typically rise toward the end of the year, and the company is expected to achieve stable annual performance this year,” said Uhm Su-jin, an analyst at Hanwha Investment & Securities.

With the offering price soon to be decided, LG CNS shares are traded at 110,000 won on the over-the-counter market. Shares of its crosstown rival Samsung SDS, a Kospi-listed company, closed at 149,000 won on Wednesday’s closing.

LG CNS’s IPO comes as part of an agreement with financial investors. In early 2020, LG Corp., the group’s holding unit, sold a 35 percent stake in LG CNS to Crystal Korea for about 1 trillion won, on the condition that LG CNS would pursue an IPO within five years.

LG Corp. is the company’s largest shareholder with a 49.95 percent stake. LG Group Chairman Koo Kwang-mo also owns 1.12 percent shares in the company.

“Through the IPO, we will enhance our core capabilities in AI, cloud and smart factories within the DX sector, increase shareholder value and grow into a truly global DX company,” an LG CNS official said.