Yuanta Securities Korea on the 27th kept a "buy" rating on Hyosung Heavy Industries, saying its business scope is expanding beyond North American ultra-high-voltage orders to responses for data center power architectures, and raised its target price to 5 million won from 4.2 million won. The previous session's closing price was 3,552,000 won.
Hyosung Heavy Industries posted first-quarter sales of 1.3582 trillion won and operating profit of 152.3 billion won. Those figures rose 26.2% and 48.7%, respectively, from a year earlier. Son Hyun-jung of Yuanta Securities Korea said, "However, operating profit slightly missed market expectations, as some profit was deferred to the next quarter."
Specifically, about 40 billion won in profit shifted to the second quarter as volumes of U.S.-bound high-margin products, circuit breakers (GIS, GCB), were counted as "inventory in transit" at the end of the quarter. Reflecting this in the first quarter would put actual operating profit at about 190 billion won, an outcome seen as beating prior expectations.
By business, the heavy industries segment recorded sales of 880.7 billion won and operating profit of 117.7 billion won, up 20.5% and 30.6%, respectively. The construction segment logged sales of 476.7 billion won and operating profit of 34.4 billion won, up 38.5% and 184.3%.
Son pointed to "new orders" as a metric more important than results. First-quarter heavy industries new orders totaled 4.1745 trillion won, up 107.8% on-year to an all-time high. Of that, 77% was from North America, and total backlog expanded to 15.1 trillion won.
Recent orders are increasing for ultra-high-voltage and high-spec products such as 765-kV transformers and 800-kV circuit breakers. As a result, the average selling price (ASP) is rising, creating a structure that leads to improved profitability.
In particular, the company won a roughly 920 billion won, 765-kV U.S. power grid project in the first quarter. With a proven installation track record (reference), the capability to supply transformers and circuit breakers as a package, and a local U.S. production base, it is seen as securing a competitive edge in the ultra-high-voltage market.
The business scope is also expanding. Beyond conventional transmission facilities, the company has added power control solutions such as STATCOM and HVDC, completed development of a 22.9-kV-class SST (solid-state transformer), and is pushing into DC power supply for data centers. Analysts say this is meaningful in that the coverage is widening from transmission networks to the internal power architecture of data centers.
Accordingly, the company is forecast to post second-quarter sales of 1.7948 trillion won and operating profit of 317.9 billion won. Those would be up 26.2% and 93.5%, respectively, from a year earlier. In particular, the heavy industries segment is expected to achieve record quarterly results, with sales of 1.2945 trillion won and operating profit of 306.7 billion won.
The target price was derived by applying a price-earnings ratio (PER) of 30 times to the expected 2027 earnings per share (EPS). Considering that comparable domestic power equipment makers trade at an average PER of about 40 times, the stock is still viewed as undervalued.