HD Hyundai Electric continued year-over-year earnings growth in the first quarter, helped by the spread of artificial intelligence (AI) data centers and demand to replace aging power grids. Backed by expanding sales of power transformers in North America, it maintained an operating margin in the 20% range, but both revenue and operating profit fell short of market expectations.
HD Hyundai Electric said in a filing on the 28th that its first-quarter operating profit on a consolidation basis was 258.3 billion won, up 18.4% from a year earlier on a preliminary basis. Revenue was 1.0365 trillion won, up 2.1% from the same period last year. Compared with the previous quarter, revenue fell 10.9% and operating profit fell 19.5%.
Compared with the securities consensus (average forecast), revenue missed by 6.5% and operating profit by 4.6%. The mainstay power equipment institutional sector continued to grow, but a decline in distribution equipment revenue and a high base from strong fourth-quarter results last year appear to have weighed.
Net profit during the same period rose 35.4% to 207.7 billion won, and the operating margin was tallied at 24.9%. Although lower than the previous quarter's operating margin of 27.6%, favorable conditions in the power equipment industry and selective order-taking helped maintain an operating margin in the 20% range.
By product, the power equipment institutional sector led results. Thanks to increased orders for power transformers in North America, power equipment revenue rose 21.6% from a year earlier. As AI data centers expand and aging grids are replaced, demand has continued for power transformers that can stably transmit and distribute large-capacity electricity. Rotating machinery revenue also rose 10.8% on strong demand for marine products.
The distribution equipment institutional sector was relatively weak. Distribution equipment revenue fell 24.2% from a year earlier. In addition to a base effect from large volumes of distribution transformers recognized in the first quarter of last year, deliveries of low-voltage circuit breakers were partially deferred due to geopolitical risks in the Middle East.
By market, North American revenue rose 26.6% from a year earlier, driving overall growth. European revenue also increased 17.0% from a year earlier. However, in Europe, revenue declined from the previous quarter due to strong fourth-quarter results last year.
Orders continued to rise. HD Hyundai Electric's first-quarter orders totaled $1.797 billion, up 34.6% from a year earlier. It achieved 42.6% of this year's annual order target of $4.222 billion in the first quarter. The order backlog stood at $7.888 billion, up 17.2% from the end of last year.
An HD Hyundai Electric official said, "Even as we continue our selective, profitability-focused order policy, orders are steadily increasing thanks to the spread of AI data centers and demand to replace aging grids," adding, "We will seamlessly complete the capacity expansions at our Ulsan plant and our North American production subsidiary that are currently underway to sustain solid growth."