Korea Investment & Securities Co. said on the 3rd that for Hyosung Heavy Industries(298040), second-quarter operating profit missed market expectations due to delayed recognition of U.S. products, adding that growth prospects are even stronger going forward. It kept its investment rating at "buy (BUY)" and its target price at 4.6 million won. The previous trading day's closing price for Hyosung Heavy Industries was 2,417,000 won.
Earlier, Hyosung Heavy Industries said it posted 1.687 trillion won in revenue and 264.3 billion won in operating profit. Those figures were up 10.6% and 60.9% from a year earlier. However, it fell 9.1% short of the market's operating profit expectation of 290.7 billion won.
However, the U.S. share of the heavy industry division's revenue came to 38%, up 15 percentage points from a year earlier. The operating margin also reached 20.2%, an improvement of 4.3 percentage points from a year earlier.
Jang Nam-hyeon, an analyst at Korea Investment & Securities Co., said, "Delays in delivering products to the Middle East and some U.S.-bound volumes being classified as in-transit inventory kept them from being reflected in the results," and noted, "As a result, 50 billion won in operating profit with delayed recognition will be recognized in the third quarter."
At the same time, the new order guidance was raised to 12 trillion won from 8.4 trillion won. Jang explained, "As demand grows for ultra-high-voltage projects centered on 765 kilovolts (kV), we secured a U.S. production facility for ultra-high-voltage circuit breakers by setting up a joint venture with Quanta Services," adding, "Our ability to respond to the North American market will be further strengthened."
Jang said Hyosung Heavy Industries' operating margin improvement is set to accelerate. He noted, "Despite the recent share price correction, order growth is actually speeding up," and projected, "With the rising share of U.S. revenue, the heavy industry division's operating margin will reach 26.4% in 2028, an improvement of 9.6 percentage points."