[Click eStock] "Hyosung Heavy Industries, Construction Business Proportion High, Profitability Improvement Likely Limited"

[Asia Economy Reporter Hwang Yoon-joo] On the 22nd, SK Securities analyzed that Hyosung Heavy Industries may have a lower profitability improvement compared to other power equipment companies. They newly issued a 'Buy' investment rating with a target price of 92,000 KRW.

Nam Min-sik, a researcher at SK Securities, stated, "The company operates a construction business that accounts for 40% of sales," and "This year, the operating profit margin is expected to increase by 0.9 percentage points from the previous year to 4.9%." SK Securities forecasted Hyosung Heavy Industries' sales this year to rise 15.8% year-on-year to 4.065 trillion KRW, and operating profit to increase 40.3% to 201 billion KRW.

Researcher Nam evaluated that the upper limit of operating profit is open when looking only at the heavy industry division. He diagnosed, "In 2023, the heavy industry division's sales are expected to increase 21.4% year-on-year to 2.414 trillion KRW, and operating profit to nearly double, increasing 98.1% to 139 billion KRW."

Researcher Kim explained, "If the utilization rate of the U.S. factory rises to around 70%, there is also potential for future operating profit growth," adding, "Currently, alongside the expansion of the U.S. production plant, the workforce is planned to increase from 200 to 450 employees by 2027."

He analyzed, "To break through the upper band of a PBR of 1.0, momentum must be attached to other business divisions besides the core heavy electrical equipment," and "There are two possibilities: the liquefied hydrogen distribution business, which will generate sales in 2024, gaining attention in the stock market, or an improvement in the construction market."

He added, "Neither of these two possibilities is currently high, so they were not reflected in the target price calculation."