Expectations in the securities industry for major domestic power-related stocks such as LS ELECTRIC and HD Hyundai Electric are being lowered recently. This is due to the outlook for lackluster first-quarter performance, universal tariff issues, and potential reductions in data center investments putting pressure on stock prices. However, considering the possibility of improved performance in the second half, opinions have emerged that the current adjustment represents a buying opportunity.
According to the financial investment industry on the 30th, LS SECURITIES lowered the target price for LS ELECTRIC from 320,000 won to 280,000 won on the 28th of this month. While there remains potential for an increase compared to the current stock price of 179,500 won, expectations have slightly decreased.
Concerns that the first-quarter performance will fall short of market expectations have been reflected as sales of distribution-related products have stagnated. LS SECURITIES forecasts LS ELECTRIC's first-quarter sales to be 1.0987 trillion won and operating profit to be 85.1 billion won, which is below the average projections in the securities industry (sales of 1.165 trillion won and operating profit of 98.9 billion won).
Shinhan Investment Corp. also lowered the target price for HD Hyundai Electric from 500,000 won to 480,000 won on the same day. This is about 5% lower than the average target price in the securities industry of 503,714 won.
The potential application of universal tariffs in North America and adjustments in the pace of global data center investments have acted as factors for the decrease in target prices. According to U.S. investment bank TD Cowen, Microsoft is reported to have temporarily halted some large-scale data center projects in the U.S. and Europe. This has raised concerns about overheating in the data center sector.
However, experts have projected that power stocks remain positive in the medium to long term. They believe that the short-term uncertainties have largely been reflected in stock prices, and that performance will begin to recover in earnest from the second half of the year.
Lee Dong-heon, a researcher at Shinhan Investment Corp., noted, "It is too early to judge that medium to long-term growth potential has slowed," adding, "U.S. tariffs are likely to exacerbate the power crisis due to reshoring, but pressure from tariff-related shortages is unlikely to occur because of a lack of power equipment."
He continued, "The shortage of ultra-high voltage power equipment and similar issues will lead to increased demand and prices, and whether the expansion of companies' capacity (CAPA) will lead to oversupply may be a topic of discussion in a few years."