The stock prices of mid-sized and small companies representing K-Power have doubled during the year of 2024, reflecting a significant surge. This is attributed to the substantial increase in power demand due to advancements in artificial intelligence (AI) technology, as well as the impending large-scale replacement of the power infrastructure in the United States.
According to a report by the financial data company FnGuide on the 2nd, the stock prices of DAEWON Electric and Iljin Electric rose by 157% and 156%, respectively, over the past year. JeRyu Electric also saw its stock price, which was in the 20,000 won range, close at 45,950 won, marking a 129% increase, while Samhwa Electric and Semyeong Electric rose by 79% and 62%, respectively. This contrasts with a nearly 10% drop in the KOSPI index during the same period.
JeRyu Electric, which generates 100% of its revenue from transformers, has directly benefited from the increase in power demand. Transformers convert high voltage to low voltage for use in homes or establishments or vice versa to transmit power over long distances. While the demand for transformers in the domestic market is sluggish due to the downturn in the construction industry, the United States has a high demand for replacing its aging power grid.
JeRyu Electric's revenue, which was 48.8 billion won in 2021, grew significantly to approximately 183.9 billion won in 2023, and is expected to reach a record high of 311.5 billion won in 2024, based on projections by FnGuide. The company's overseas sales account for about 92% as of the third quarter of 2024.
As demand for transformers improves, wire companies are also enjoying special benefits. This is because wires must be consolidated to transmit power at a lower voltage when replacing old transformers or installing new ones.
The continued record-breaking performance of Iljin Electric, a comprehensive heavy electrical corporation that produces various wires ranging from low to ultra-high voltage, is due to strong sales in the Americas as well as in Asia and Australia. Securities analysts estimate that Iljin Electric, which recorded sales of 1.2467 trillion won in 2023, will achieve over 1.5 trillion won in sales in 2024.
DAEWON Electric specializes in manufacturing various wires for power transmission and distribution, as well as industrial wires used in automobiles. Of its sales of about 500 billion won, the export share mainly centered on Hong Kong and the United States accounts for about 20% to 25% of total sales. Recently, the company has been conducting sample tests with several U.S. power companies, raising expectations for business expansion into the U.S.
Semyeong Electric has commercialized the domestic development of fittings for power transmission and distribution wires that were 100% imported from Japan. These fittings connect transmission towers to ultra-high voltage wires, serving to support the wires even in strong winds. With the development of fittings for the ultra-high voltage direct current transmission line expected to handle the power from the global commercialization of AI, the company is set to complete deliveries this year, raising optimism for performance.
Samhwa Electric, which produces electrolytic capacitors for AI data centers, is also projected to benefit from increased demand for power infrastructure, with estimated sales of 227 billion won in 2024, representing a 12% increase from the previous year, while operating profit is expected to rise by over 232% to 26 billion won.
Despite the challenging market environment, the positive performance of K-Power corporations based on exports is expected to continue this year as the 'Trump II' administration begins.
Mirae Asset Securities noted in a recent report that 'the demand for replacing existing transmission and distribution networks, along with investments in U.S. power infrastructure, will continue during the Trump II administration', adding that 'as overseas orders increase in Europe and the Middle East, the boom in K-Power related to transformers is likely to persist.'
In October last year, the U.S. Department of Energy announced an investment plan for a transmission network worth $1.5 billion (approximately 2 trillion won) to construct a new transmission line approximately 1,000 miles (1,609 km) long. Fifty utility companies in the U.S. have also significantly increased their annual investment in facilities to about $200 billion (approximately 294 trillion won) from 2024 to 2026.