NH Investment & Securities on the 20th said Hyosung Heavy Industries has the most attractive valuation among power equipment-related stocks.
It maintained a Buy rating and raised the target price to 3.6 million won from 3.1 million won. Hyosung Heavy Industries closed the previous trading day at 2,731,000 won.
Lee Min-jae, an analyst at NH Investment & Securities, said, "As transmission investment in North America expands, the supply shortage is becoming prolonged," and added, "Profitability will improve to the level of competitors, and the valuation is attractive, so we maintain our investment view."
NH Investment & Securities projected that the share of North American sales will gradually grow as capacity expansions of ultra-high-voltage transformer plants in Changwon, South Gyeongsang, and Memphis, U.S., and eco-friendly gas-insulated switchgear (GIS) are completed by 2028.
It also estimated that the net profit margin last year of HICO, Hyosung Heavy Industries' North American manufacturing subsidiary, was above the 30% range, and said additional profitability improvement is possible considering the gradual price hikes of ultra-high-voltage transformers.
Hyosung Heavy Industries' heavy industry segment operating margin is estimated to improve from 17% last year to 24% in 2028. As the share of North American sales increases from 27% to 38% over the same period, it is expected to expand further depending on when additional expansions at the Memphis plant are completed.
The analyst said, "The average price-earnings ratio (PER) of domestic and overseas power equipment industries in 2028 is 22 times, which is far from Hyosung Heavy Industries," and added, "Given that they share the same markets and products and the impact of the construction segment has diminished, the attractiveness is high."