Doosan Heavy Industries to End 'Cash Cow' Infra Core, Sustains with New Industries and Bobcat

Trend of Increasing New Orders with Eco-Friendly Energy Projects
New Growth Areas Wind Power and Gas Turbines to Fully Launch Within Two Years
Doosan Bobcat Expects Strong Performance Next Year Due to US Housing Boom
Synergy Expected with Doosan Fuel Cell, Subsidiary Since Last Month

[Asia Economy Reporter Ki-min Lee] Hyundai Heavy Industries Holdings was selected as the preferred bidder for the sale of Doosan Infracore on the 10th, effectively marking the final stages of Doosan Heavy Industries & Construction's management normalization plan for this year. With Doosan Infracore, once a 'cash cow,' leaving its portfolio, Doosan Heavy Industries now faces a situation where it must rely on Doosan Bobcat to get through next year until new businesses such as gas turbines and offshore wind power get on track. However, the industry expects that there will be no significant hardship caused by the sale of Doosan Infracore, as Doosan Heavy Industries' order situation is improving and Doosan Bobcat is also expected to perform well next year.

First, the industry anticipates that Doosan Heavy Industries' next-generation growth engines, the offshore wind power business and gas turbine business, will be fully launched within two years, allowing performance to return to a normal trajectory. As of the third quarter of this year, Doosan Heavy Industries' new orders amounted to 2.57 trillion KRW, a 19.4% increase compared to 2.1484 trillion KRW during the same period last year. Up to the third quarter, Doosan Heavy Industries secured orders for projects such as the Gimpo combined heat and power plant, Boryeong Unit 4 eco-friendly improvements, and waste-to-energy (WtE) plants.

Next year, in line with the Green New Deal policy, the company plans to increase domestic offshore wind power order activities. The industry forecasts that the domestic wind turbine market will grow to 28.5 billion USD (approximately 31 trillion KRW) by 2030. Of this, turbines produced by Doosan Heavy Industries are expected to account for about half, approximately 14.3 billion USD (about 15.5 trillion KRW). Additionally, the gas turbine, being developed as a new growth engine by Doosan Heavy Industries, is expected to be commercialized in 2022.

Until Doosan Heavy Industries' performance gets back on track, Doosan Bobcat is expected to play a significant role as a cash cow. The U.S. housing market, which had been depressed since April due to the spread of COVID-19, has rapidly rebounded and recently entered a boom phase, leading to strong performance expectations for Doosan Bobcat, which holds the No. 1 market share in the North American compact construction equipment market. The National Association of Home Builders (NAHB) housing market index, an indicator of U.S. housing transactions and new home construction, plummeted until April 30, when COVID-19 first spread in North America, but surged to 85 in October and 90 last month. The U.S. housing market boom is expected to continue next year. Furthermore, single-family housing starts are projected to grow by 18% compared to this year.

The financial investment sector also expects Doosan Bobcat to record strong performance next year. Shinhan Investment Corp. recently stated, "Doosan Bobcat's North American sales next year are expected to reach 3.04 billion USD, a 13.4% increase from this year," adding, "Considering inventory restocking demand, Doosan Bobcat's North American sales next year could grow by up to 32% compared to this year." Daishin Securities also noted in a report, "Reflecting benefits from infrastructure investments, sales are expected to increase by 16% and operating profit by 47% compared to this year."

Moreover, the industry views Doosan Heavy Industries' acquisition of a majority stake in Doosan Fuel Cell last month as likely to create synergy effects for future business. Earlier, Chairman Park Jung-won and other related parties donated their shares in Doosan Fuel Cell to Doosan Heavy Industries free of charge on the 26th of last month. Researcher Byunghwa Han of Eugene Investment & Securities analyzed in a report, "Currently, only about 0.6 GW has been installed, and the scale approved by the Electricity Regulatory Commission is about 4 GW," adding, "Doosan Fuel Cell, which holds over 70% market share domestically, has very high growth visibility." An official from the power generation industry also commented, "Although Doosan Heavy Industries may feel somewhat regretful about selling Doosan Infracore, which it had nurtured, it has laid the groundwork for management normalization," and added, "With expectations of good performance from its own businesses and Doosan Bobcat, the likelihood of Doosan Heavy Industries facing management difficulties again appears low."