LS Securities analyzed that although HD Hyundai Electric is expected to maintain its profitability this year, it is uncertain when the price adjustment will end. They lowered the target price from the previous 560,000 won to 480,000 won and suggested a 'buy' investment opinion. On the previous trading day, HD Hyundai Electric's closing price was 305,000 won.
LS Securities projected that HD Hyundai Electric's consolidated sales and operating profit for the first quarter of this year would reach 930 billion won and 202 billion won, respectively, marking increases of 16% and 57%. The operating profit margin is expected to grow by 5.6 percentage points to 21.7% compared to the previous year.
This is mainly because the strong demand for ultra-high voltage products in the North American market and the carryover of power transformer deliveries from American customers last year's fourth quarter were larger than expected. Seong Jong-hwa, a researcher at LS Securities, noted, "Although the first and third quarters are typically off-seasons compared to the second and fourth quarters, this year's first quarter is expected to perform unusually well. Furthermore, a significant portion of the carryover from last year's fourth quarter is reflected, and most of these carryovers are from power equipment products in the U.S. market, which are the most profitable."
Strong performance is also expected this year. LS Securities estimated that HD Hyundai Electric's annual projected sales and operating profit would amount to 4.0483 trillion won and 914.1 billion won, respectively, reflecting increases of 22% and 37% compared to the previous year.
The impact of the general tariff is expected to be limited. Seong, the researcher, mentioned, "In the case of the company, the sales proportion in the U.S. market is 30%, and among them, 60% come from products manufactured at the Alabama ultra-high voltage transformer factory, while only 40% is direct exports," and further added, "Basically, the impact of the general tariff is relatively limited. Since power equipment is considered a national project for power grid modernization in the U.S., imposing tariffs is unlikely to significantly affect import demand." There is also a possibility that if the general tariff rate for Korean transformers is lower than the 25% general tariff rate for Mexico, the import demand from Mexico may shift to Korean products.
Seong, the researcher, found it difficult to predict when the price adjustment that began in February would end but noted the need to seek buying opportunities. He stated, "Although a considerable portion of the stock price has been adjusted due to profit-taking adjustments and the noise of general tariff uncertainties, the overall market boom and favorable performance trends have remained intact, thus increasing the valuation capacity significantly."