Hanwha Investment & Securities on the 20th said Hyosung Heavy Industries(298040) is establishing a solo lead in the North American ultra-high-voltage transmission market on the back of unrivaled competitiveness and strong order momentum. It set a Buy rating and a target price of 4.5 million won and picked it as the top pick in the power equipment sector. The previous session's closing price was 2,908,000 won.
Kim Ye-in, an analyst at Hanwha Investment & Securities, said, "Order momentum for ultra-high-voltage products bound for North America continues based on proven references and local production capacity," and noted, "Aggressive capacity expansion plans scheduled through 2028 and capabilities expanding into next-generation power solutions such as SST (semiconductor transformer) and STATCOM (static reactive power compensator) will firmly underpin mid- to long-term growth."
According to Hanwha Investment & Securities, Hyosung Heavy Industries is a leading supplier that has provided about 50% of the 765 kV large transformers installed in the United States. In particular, it owns the Memphis plant, currently the only facility in the United States capable of producing 765 kV transformers, minimizing transportation burdens and tariff risks and securing stable delivery schedules. The Memphis plant's CAPA (production capacity) is expected to expand significantly from the current $400 million level to $600 million–$700 million upon completion of the second expansion in 2028.
An increase in the order backlog driven by expanded global power infrastructure investment also stands out. New orders in the first half of this year totaled 750 billion won, already achieving 63% of the upwardly revised annual guidance. North America accounts for 71% of this. Based on the total order backlog, North America's share is also at a record high of 57%.
The earnings outlook is bright. Hyosung Heavy Industries' full-year results are estimated at 7.202 trillion won in revenue and 1.228 trillion won in operating profit, up 20.7% and 64.3%, respectively, from a year earlier.
Kim said, "If earnings growth so far has centered on the 'regional mix' improvement effect from a higher North American share, starting next year the recognition of revenue from 765-kilovolt (kV) high value-added product lines will become full-fledged, adding the 'product mix' improvement effect," and predicted, "Simultaneous improvements in regional and product mix will enable a step-up to a higher level of earnings."
Kim added, "Given its leading position in the North American ultra-high-voltage market and aggressive capacity expansion, it is reasonable to assign a premium," and said, "Valuation pressure has also eased significantly due to the recent share price correction."