Yuanta Securities Korea said Hyosung Heavy Industries(298040)'s core competitiveness in North American ultra-high-voltage transformers remains solid and said the recent share-price pullback is excessive.
At the same time, it maintained a "buy (BUY)" rating and a target price of 5 million won. The previous trading day's Hyosung Heavy Industries closing price was 2,666,000 won.
Son Hyun-jeong of Yuanta Securities Korea said in a report on the 14th, "As second-quarter shipments to the United States are reflected and the high-margin order backlog centered on North American ultra-high-voltage transformers converts to sales, the magnitude of profit improvement will expand," projecting that on a consolidation basis for the second quarter, revenue will be 1.7417 trillion won and operating profit will be 272.2 billion won, in line with market consensus.
By business unit, the heavy industry division is expected to post revenue of 1.2415 trillion won and operating profit of 261.2 billion won, for an operating margin of 21.0%. The construction division is forecast to record revenue of 500.3 billion won and operating profit of 11 billion won, swinging to a profit from a loss a year earlier.
Son said, "In the heavy industry division, the benefit from a North America-bound, high-value product mix continues, and the construction division will also move off a loss-making base and contribute to stability in consolidation results."
He also said order momentum remains intact. "In the first quarter, new orders in heavy industry surpassed 4 trillion won, marking a quarterly record, and in the second quarter, new orders of more than 2 trillion won are expected," he said. "With just the cumulative new orders in the first half, there is a high likelihood of achieving a significant portion of the annual guidance, so an upward revision to the heavy industry new-order guidance is anticipated in this earnings release."
He also pointed to the expansion of investment in the North American power grid and rising power demand from data centers as medium- to long-term growth drivers. In particular, he cited the ultra-high-voltage circuit breaker joint venture (JV) recently established with U.S. power and energy infrastructure company Quanta Services as a new investment point.
Son said, "Hyosung Heavy Industries is the only domestic power equipment company that has simultaneously secured production bases in the United States for ultra-high-voltage transformers and ultra-high-voltage circuit breakers," adding, "Its competitiveness in winning North American ultra-high-voltage package orders will strengthen."
He added, "Through this JV, we have secured a channel to access demand for ultra-high-voltage circuit breakers for big tech data centers," and said, "It will act as an upward factor for earnings per share (EPS) in 2027–2028."
He added, "Despite the recent share-price pullback, earnings power and order visibility have not been damaged," and maintained the existing "buy" rating and target price of 5 million won.