[Click eStock] Hyundai Electric, Surge in Orders... Is the Golden Era Returning? 'Target Price Up'

[Asia Economy Reporter Lee Seon-ae] DB Financial Investment announced on the 1st that it has raised the target price of Hyundai Electric to 37,000 KRW and maintained a buy rating.

Kim Hong-gyun, a researcher at DB Financial Investment, stated, "Hyundai Electric once recorded sales of 3.6 trillion KRW in 2010 during its time as a division of Hyundai Heavy Industries, and an operating profit margin of 17.6% in 2008," adding, "The current increase in orders in the Middle East, shipbuilding, and offshore sectors reminds us of those prosperous days. Therefore, we are raising the target price by applying a 1.5x price-to-book ratio (PBR) based on the average upper range since listing and a 12-month forward book value per share (BPS) of 24,823 KRW."

It is expected that the proportion of revenue recognition from orders reflecting raw material price increases will further rise in the second half of the year. Next year, as the effect of increased new orders from this year is fully reflected in sales, a significant growth of about 28% in sales is anticipated. Qualitatively, improvements are expected as contract prices for Middle Eastern and ship products rise and sales from Korea Electric Power Corporation (KEPCO) affiliates recover. Additionally, a refund of approximately 84 million USD is imminent following the ruling on the 11th by the U.S. Federal Circuit Court of Appeals dismissing the appeal related to the fourth anti-dumping case on transformers.

Hyundai Electric's order backlog at the end of June stood at 2.52 billion USD, an increase of 720 million USD compared to the end of last year. Despite a selective order policy, the explosive increase in orders driven by strong markets in the Middle East, shipbuilding, and North America is expected to continue in the second half, with annual new orders this year projected to approach 3 billion USD, significantly exceeding sales. On the 30th, after about 3 years and 10 months since the last order announcement from the Middle East, Hyundai Electric signed a contract worth 67.6 billion KRW with the Saudi Electricity Company for the supply of transformers and reactors, heightening expectations for industry improvement.