IBK Securities has projected continued solid performance growth for Hyosung Heavy Industries, maintaining a target price of 4.9 million won and a "buy" rating.
Kim Tae-hyun, an analyst at IBK Securities, forecasts that Hyosung Heavy Industries will report consolidated revenues of 1.9091 trillion won and operating profit of 324.5 billion won for the second quarter of this year, representing increases of 25.2% and 97.6%, respectively, compared to the same period last year. These figures exceed the market consensus of 1.8172 trillion won in revenue and 287.6 billion won in operating profit.
Kim noted, "The heavy industry sector will continue its solid performance due to the reflection of deferred shipments from the first quarter, while the construction sector will benefit from a base effect following last year's poor performance."
The heavy industry sector is expected to achieve revenues of 1.3667 trillion won and operating profit of 302 billion won. Although some high-margin products, such as circuit breakers for the U.S. market, were recorded as inventory during transportation in the first quarter and did not contribute to performance, it is anticipated that these will generate approximately 100 billion won in revenue and about 40 billion won in operating profit in the second quarter. While the order environment remains favorable, new orders may decline compared to the substantial orders of 4.2 trillion won received in the first quarter.
The construction sector is also expected to see improved performance, with projected revenues of 542.4 billion won and an operating profit of 22.5 billion won, marking a return to profitability. The removal of uncertainties regarding the collection of receivables from unsold officetels in Busan, which led to a provision for bad debts of about 24 billion won in the second quarter of last year, is expected to significantly enhance profitability.
Kim highlighted solid state transformers (SST) as a long-term growth driver for Hyosung Heavy Industries. He explained that the demand for next-generation transformers, which can control power flow and quality, is increasing due to the expansion of AI data centers and direct current (DC) power networks.
He stated, "Hyosung Heavy Industries completed the development of a 22.9 kV solid state transformer in 2022 and is currently conducting a demonstration project for power supply to data centers. Although it is still in the early stages of the business and its contribution to actual sales is limited, gradual results are expected to become visible after next year as the market expands."
* This article has been translated by AI.
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