[Click eStock] "Doosan Fuel Cell, Unavoidable Order Gap"

Doosan Fuel Cell Q2 Operating Profit Falls 58% Short of Consensus
Impact of Order Gap from Q3 Last Year
Focus on Renewable Energy Policy to Be Announced in Second Half

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Doosan Fuel Cell showed sluggish performance in the second quarter of this year due to an order gap that occurred last year. However, attention should be paid to renewable energy-related policies to be implemented from the second half of the year.

According to KB Securities on the 28th, Doosan Fuel Cell's provisional sales in the second quarter recorded 55.6 billion KRW, down 49.5% from the same period last year, and operating profit was 1 billion KRW, down 92% during the same period. The provisional operating profit was about 58% below the market consensus of 2.4 billion KRW.

This is interpreted as a performance below consensus due to the order gap that occurred last year. Sales of fuel cell equipment are generally recognized between 6 months to 1 year after the order, but orders in the second and third quarters of last year, which affect the second quarter of this year, were only 20 megawatts (MW) and 0 MW, respectively.

(Provided by KB Securities)

However, fixed operating expenses such as depreciation and labor costs remained unchanged. As of the end of last year, 9.9% of total operating expenses were fixed costs. Accordingly, the operating profit margin, which was 11.4% in the second quarter of last year, sharply dropped to 1.8% in the second quarter of this year.

Growth is expected to depend on renewable energy-related policies to be announced in the second half of the year. Although the specific implementation details of the Hydrogen Power Obligation System (HPS) have not yet been announced, the amendment to the Hydrogen Act is still under discussion. On the 6th, the Ministry of Trade, Industry and Energy also disclosed a revision to the Renewable Energy Certificate (REC). KB Securities researcher Jung Hye-jung explained, “As renewable energy-related policies are implemented, postponed orders will be in full swing from the second half of the year,” adding, “The increased production capacity since last year is also positive for recovering the order backlog.”

Sales in the second half of the year are expected to recover along with revenue recognition for fuel cell equipment ordered in the fourth quarter of last year. Researcher Jung said, “In the fourth quarter of this year, due to the demand for small-lot deliveries from some power companies, revenue recognition for orders received in the third quarter may be reflected quickly.”