Shinhan Investment Corp. announced on October 14 that it is maintaining a "buy" rating and a target price of 100,000 won for Iljin Electric, citing the continued growth in its transformer and cable businesses. The recent decline in stock prices is attributed to supply and demand factors rather than the company's fundamentals.
Heo Seong-kyu, a researcher at Shinhan Investment, noted, "Iljin Electric's market capitalization dropped approximately 68% from about 6.9 trillion won in May to 2.2 trillion won by the end of July. Considering the expanding boom in the cable sector following transformers, we believe the stock price decline is due to supply and demand issues rather than fundamental problems."
Iljin Electric's transformer business is showing stable growth. In the first half of this year, the operating profit in the heavy electrical equipment sector reached 82.5 billion won, with an operating profit margin increasing by 3.8 percentage points year-on-year to 25%. Notably, the operating profit margin in the Americas reached 28%.
Heo added, "The production volume for transformers is fully planned through 2028, and with an increased proportion of high-margin products, the revenue scale based on production capacity (CAPA) has expanded from the previous 430 billion won to around 500 billion won."
The expansion of Iljin Electric's overseas cable business is also viewed positively. The company recently signed a supply contract for transmission network cables worth 187.1 billion won with the UK Power Networks. As a result, the order backlog in the power line sector is expected to exceed 1 trillion won.
Shinhan Investment forecasts Iljin Electric's revenue for this year to be 2.35 trillion won, with an operating profit of 252.8 billion won, representing a 67.2% increase from the previous year.
Heo pointed out, "The projected price-to-earnings ratio (PER) for 2027 is 18 times, which is lower than the average of 24 times for the three major power equipment companies, highlighting the current undervaluation of the stock."
* This article has been translated by AI.
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