DS Investment & Securities Raises SGC Energy Target on Data Center, Power Outlook

 
DS Investment & Securities on Tuesday maintained its “buy” rating on SGC Energy and raised its target price to 83,000 won, citing expectations for a normalization in power-generation earnings and expansion of its data center business.
 
Ahn Ju-won, a researcher at DS Investment & Securities, said SGC Energy posted first-quarter revenue of 612.0 billion won and operating profit of 35.6 billion won, down 1.0% and up 102.7% from a year earlier, respectively. He said higher winter electricity demand lifted the system marginal price, or SMP, slightly boosting generation revenue, while the generation operating margin recovered to 6.7%, helping overall profitability return to normal levels. The generation margin was about 2.2% in the first quarter of last year.
 
The construction segment delivered steady results as plant project progress improved, with an operating margin of 5.9%. The glass business, however, saw both revenue and profit slow due to weaker consumption of alcoholic beverages and drinks, he said.
 
Looking ahead, Ahn said rising oil prices tied to tensions in the Middle East could push SMP higher and accelerate gains in the generation business. He noted the average SMP was 107 won in the first quarter but had risen to 119 won as of April. He added that while WTI has fallen from its peak, it remains in the $80 range, suggesting SMP could stay elevated.
 
DS Investment & Securities forecast this year’s operating profit in the generation segment at 146.2 billion won, a sharp increase from a year earlier, with an operating margin of about 14.8%. The construction business is expected to sustain stable growth as orders expand, led by semiconductor and pharmaceutical-bio projects.
 
Ahn also pointed to the data center business as a mid- to long-term growth driver. He said annual profit of about 100.0 billion won is expected from data center leasing income starting in 2028. The plan calls for a total capacity of 300 megawatts, and the operating timeline for the first 40 megawatts has been confirmed. He said demand is rising quickly as global companies expand AI investment in South Korea, and the second phase is expected to take shape between late this year and early next year.