Riding the nuclear power boom, Doosan Enerbility, whose share price had surged, posted a third-quarter "earnings shock" (results falling short of expectations). Securities firms had projected Doosan Enerbility's third-quarter operating profit would exceed 280 billion won, but the actual figure came in at 137 billion won, not even half of the estimate.
Growth in the core energy business fell short of expectations, and subsidiary Doosan Bobcat also underperformed. On top of that, the sharp rise in the share price turned into an unexpected stumbling block. Because stock-based compensation paid as long-term performance pay for employees increases in line with the share price, about 25 billion won in one-off expense was additionally reflected.
Not only Doosan Enerbility but also major corporations such as Samsung Electronics, SK hynix, and Hanwha have recently been actively using shares for employee performance compensation. When the share price rises, the reward effect grows, but at the same time the dilemma deepens as it imposes a considerable burden on the financial statements.
An industry official said, "To achieve the dual goals of boosting the share price and rewarding employees at the same time, it is ultimately important to strengthen the competitiveness of the core business and build the capacity to generate operating performance sufficient to offset the performance pay expense."
Doosan Enerbility recently announced its third-quarter results for this year. Revenue rose 14.3% year over year to 3.88 trillion won, and operating profit also increased nearly 20% to 137.1 billion won.
Although results improved significantly, they fell short of securities firms' forecasts, leading to analysis of an "earnings shock." The reasons operating profit did not meet experts' expectations were, first, a sharp decline in operating profit at consolidated subsidiary Doosan Bobcat and, second, a wider operating loss at Doosan Fuel Cell. In addition, as the share price soared, the one-off expense burden for long-term performance pay increased.
Moon Kyung-won, a Meritz Securities researcher, said, "Expenses increased due to non-operating variables, and third-quarter operating profit came in below the consensus (the average forecast of securities firms)," adding, "200 billion to 300 billion won in expenses for long-term performance pay (RSU) to executives was reflected."
The reason the expense ballooned was the surge in Doosan Enerbility's share price. The share price, which was around 18,000 won at the start of the year, rose to around 100,000 won on Oct. In recent days it has seen some correction, but it is still trading in the 70,000 to 80,000 won range, higher than at the start of the year.
The global nuclear power boom lifted Doosan Enerbility's share price. As the artificial intelligence (AI) industry grows explosively, the view that demand for nuclear power will also rise to meet increasing electricity demand sent the share price soaring. As the share price jumped, Doosan Enerbility's market capitalization ranking, which was outside the top 30 as recently as the start of the year, leaped to 5th to 7th place. The unusual share price rally was enough to weigh on operating profit.
Still, as nuclear power orders continue, the earnings improvement trend is expected to continue. Heo Min-ho, a Daishin Securities Co. researcher, said, "The reason third-quarter operating profit fell short of expectations was the one-off expense," and analyzed, "From the fourth quarter, as nuclear power orders get into full swing, the share price could rise further."