[Click eStock] "Surging Power Demand... HD Hyundai Electric & Hyosung Heavy Industries, Top Sector Picks"

Daol Investment & Securities stated on the 4th that "global electricity demand is surging, but supply is insufficient," naming HD Hyundai Electric and Hyosung Heavy Industries as the top preferred stocks in the power equipment sector.

On the same day, researchers Jeon Hye-young and Cha Yoon-ji from Daol Investment & Securities said, "With expansion announcements beginning due to the market boom, long-lead orders are expected to continue into next year."

Electricity demand continues to increase, but the problem lies in supply. Researchers Jeon Hye-young and Cha Yoon-ji stated, "Global electricity demand is expected to surge due to the expansion of data center usage by big tech (large information technology companies). After experiencing a hot summer, electricity demand for building cooling will also increase," adding "advanced countries such as the United States and Europe are phasing out coal-fired power plants in accordance with the Paris Climate Agreement, so new power plants are needed to supplement the generation capacity," they said.

They also noted, "According to Wood Mackenzie, the lead time from ordering to delivery of transformer products increased from about 50 weeks in 2021 to an average of 120 weeks this year," adding, "As supply shortages persist, transformer prices have surged sharply, and looking at the Producer Price Index (PPI) trend for transformers, it has risen about 80% since the COVID-19 period."

Daol Investment & Securities maintained a target price of 500,000 KRW and a buy rating for HD Hyundai Electric. Researcher Jeon Hye-young said, "The transformer price increases that started in the United States are expanding globally to Europe and the Middle East," adding, "Given the high profitability and a backlog of more than three years, there is a high possibility of additional expansions. Now is the time to enjoy the favorable market conditions and strong performance."

They also maintained a target price of 480,000 KRW and a buy rating for Hyosung Heavy Industries. Researcher Jeon Hye-young evaluated, "The proportion of sales and orders in the highly profitable U.S. market is gradually increasing," adding, "unit prices in Europe and the Middle East continue to rise, narrowing the profit margin gap with competitors. As transformer supply shortages intensify, suppliers maintain pricing negotiation advantages, and there is still room for profitability improvement."