[Click eStock] "HD Hyundai Electric, the biggest beneficiary of the power equipment super cycle... Target price 410,000 won"

Coverage Initiated with 'Buy' Investment Rating and Target Price of 410,000 Won

On the 20th, KB Securities initiated coverage on HD Hyundai Electric, identifying it as the biggest beneficiary of the power equipment super cycle, with a 'Buy' rating and a target price of 410,000 KRW.

Jeong Hye-jeong, a researcher at KB Securities, stated, "We expect HD Hyundai Electric to continue its growth in both scale and profitability, as it can respond timely through proactive investments in production facilities amid rapidly increasing demand for high-voltage transformers." She added, "While the US transformer market has experienced an unprecedented supply shortage in recent years, domestic and international suppliers have not actively expanded production capacity due to the cyclical nature of the industry, so the boom in the high-voltage power equipment market is expected to continue for the time being."

KB Securities forecasts HD Hyundai Electric's performance this year with sales increasing 28.6% year-on-year to 3.5 trillion KRW, operating profit rising 124.5% to 707.6 billion KRW, and net profit growing 91.9% to 497.3 billion KRW. Researcher Jeong noted, "Since 2021, when operating margins were severely impacted by one-off factors, exports to the highly profitable US market have surged, leading to a rapid recovery across all sectors centered on power equipment and distribution equipment." She emphasized, "The most notable segment is the power equipment division, which includes ultra-high-voltage transformers, where high-margin orders from the US market continue to be reflected, enabling ongoing improvements in both scale and profitability."

She expressed optimism about margin improvements driven by securing order backlogs over the next five years and increasing high-margin selective orders. Jeong explained, "HD Hyundai Electric has secured order backlogs through 2028-2029 and is optimizing profitability through selective ordering. In the US market, which is the main growth driver, there is a strong preference for domestically produced and non-Chinese products, and the company has already established production bases in the US with potential for further expansion, which is positive." She added, "Additionally, the expansion policy for medium- and low-voltage equipment is also favorable."