[This Week's Industry Insight] K-Boiler Warms North American Homes... Stock Prices Soar Amid Cold Wave

Stock Price Hits 100,000 Won... 'All-Time High' in Two Months
New Product Launches Full-Scale Sales in Key North American Market
Trump Administration Acts as a Boon, Not a Bane
Global Growth Expected to Offset Domestic Slump

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There is a stock in the KOSPI market that has rewritten its all-time high price again since the beginning of 2025. It is Kyungdong Navien, Korea's representative boiler company. Kyungdong Navien closed at 100,000 KRW on the 6th, surpassing its previous all-time high of 94,300 KRW recorded on November 15 last year in about two months. As the heating season fully begins, the stock price is also heating up.

Kyungdong Navien is a stock that has nearly doubled in one year. The stock price rose 86% from 47,200 KRW at the end of 2023 to 87,800 KRW at the end of last year, and it is now igniting another rally. Comparing the target prices recently issued by DS Investment & Securities and Shinhan Investment Corp., which released reports on Kyungdong Navien, there is still room for growth. DS Investment & Securities set a target price of 130,000 KRW, and Shinhan Investment Corp. set 120,000 KRW.

Kyungdong Navien was established in 1978 under the name Kyungdong Machinery, later renamed Kyungdong Boiler, and finally changed to its current name in 2006. It produces and sells oil boilers, gas boilers, and absorption-type chillers. Its subsidiaries include Kyungdong Everrun, which manufactures thermal combustion equipment, Kyungdong TS engaged in real estate, and sales subsidiaries in the United States, China, Russia, and the United Kingdom. Additionally, last year, it expanded its indoor air quality business by acquiring SK Magic's gas range, electric range, and electric oven businesses.

K-Boiler Warms the World

Looking at Kyungdong Navien's sales structure, it is a typical export company. 72% of total sales come from overseas. According to DS Investment & Securities, as of the first half of last year, sales by region were 61% in the United States, 28% in Korea, 5% in Russia, 4% in Europe and India, and 2% in China. Notably, it holds the number one market share in the North American condensing water heater market, estimated at about 30-40%. This means that one out of every two products in this market is a Kyungdong Navien product.

Sales and operating profit have been growing every year. Since 2007, sales have never declined even once. This year, sales are expected to reach 1.68 trillion KRW, and operating profit 165 billion KRW. Compared to the 2024 earnings estimates, these figures represent increases of over 10%. Furthermore, the expected operating profit margin of 9.8% is the highest among peers. Kyungdong Navien, which exports products to 47 countries, is showing its presence not only in North America but also in Central Asia and Latin America. It holds the number one boiler market share in Kazakhstan. Starting with Mexico in 2022, it has actively entered the Latin American market. While the domestic market is stagnant, the expansion of overseas sales is driving growth.

New Growth Engine to Accelerate from This Year

Kyungdong Navien is expected to face a new turning point this year. This is because the new product called 'Condensing Hydro Furnace' will begin full-scale sales in its main market, North America. The furnace market is five times larger than the condensing water heater market, and the potential annual maximum sales scale is expected to exceed 500 billion KRW. The new product supplies heating by exchanging heat between air and water after heating water. This differs from the existing American heating devices that burn gas to blow hot air indoors. Suhyun Kim, a researcher at DS Investment & Securities, said, "Kyungdong Navien's product has the advantage of providing warm, humid air through water," adding, "It is expected to bring significant innovation to the U.S. heating system." Attention is also focused on whether it can expand not only to the main residential market but also to office use.

The Condensing Hydro Furnace is a representative product reflecting Kyungdong Navien's 'localization strategy.' The reason for Kyungdong Navien's overseas success is precisely the production of 'customized products' that respond to local demand. In the U.S., most employees are locals, with only key experts dispatched locally, and products suitable for the local market were developed mainly at the research center in Guro, Gocheok-dong. Kyungdong Navien's new product received high praise from local industry players at last year's largest North American HVAC exhibitions, 'AHR 2024' and 'IBS 2024,' signaling a successful launch. The main production base and headquarters, the Seotan plant, supports Kyungdong Navien's global competitiveness by establishing a three-stage advanced automation system consisting of automated production, robotic assembly, and automated inspection. Additionally, Kyungdong Navien's research and development (R&D) personnel account for about 20% of its employees, and R&D investment has increased from the 1% range to the 3% range of sales over the past decade. Kyungdong Navien is a company serious about R&D.

'Trump Risk' Zero... Expectation of Foreign Exchange Gains

Many domestic export companies are concerned about 'tariff risks' following the inauguration of the second Trump administration. Kyungdong Navien is an exception. Water heaters and boilers are classified as essential goods necessary for survival, so there are no tariffs or export regulations in North America and other regions. On the contrary, the Trump administration's fossil fuel-centered energy policy and housing supply expansion pledge are expected to increase demand for Kyungdong Navien's products. The current main product, the condensing water heater, uses fossil fuels. Although it has a high dependence on overseas markets, it is relatively free from 'geopolitical risks.' A representative example is that despite the Ukraine war, boiler sales to Russia were not restricted. Kyungdong Navien holds the number one position in wall-mounted boilers in Russia.

Moreover, Kyungdong Navien is expected to benefit from a strong dollar and weak Korean won. Since overseas sales account for a large proportion, sales increase as the won-dollar exchange rate rises. This means profitability improves when the exchange rate rises. If this high exchange rate trend continues, it is expected to partially offset increased logistics costs (freight) due to overseas business expansion. Also, Kyungdong Navien sources key components through subsidiaries, which makes its cost structure advantageous, and since sales are denominated in North American dollars, it can enjoy foreign exchange gains more than other companies.

Sungkyu Heo and Byunghwa Lee, researchers at Shinhan Investment Corp., said, "Export performance has increased compared to 2019 when the price-to-earnings ratio (PER) reached 20 times just on expectations of entering the Chinese boiler market, and there is sufficient room for growth due to new product launches and favorable policy trends." As of the 6th, Kyungdong Navien's PER is 17.38 times. In 2019, when expectations for China were high, Kyungdong Navien's PER reached up to 21 times.

Domestic Demand Concerns Due to Construction Market Downturn

The domestic boiler market has remained at annual sales of 1.2 to 1.3 million units since the early 2000s. Growth has stagnated due to the spread of central heating and the emergence of large complexes. The possibility of sudden growth in the future is low. This is the main reason Kyungdong Navien transformed into an export company about ten years ago. Globally, the world boiler market (residential basis) is expected to grow at an average annual rate of 5.5%, from about 31.1 billion USD (about 45 trillion KRW) in 2023 to 53.1 billion USD (about 77 trillion KRW) in 2033.

Since dependence on the domestic market has decreased, performance is not greatly affected by domestic demand, but this year it is considered a risk factor that may have some negative impact. This is because the construction market, closely linked to the boiler market, is sluggish. The boiler industry tends to see increased demand when the construction market is good and decreased demand during recessions. According to the real estate industry, apartment move-in volumes this year are expected to be the lowest since 2014, and pre-sale volumes the lowest since 2000.

Chaerim Shin, a researcher at Korea Investment & Securities, said, "Domestic boiler sales are limited due to the contraction of construction orders and new construction starts, but growth in the main market, the U.S., due to increased demand for high-efficiency and eco-friendly HVAC equipment and expansion of the home appliance business is expected."

Ultimately, Kyungdong Navien's goal is to overcome the limitations of the stagnant domestic market and leap forward as a global lifestyle environment solution company. To this end, it plans to expand the Seotan plant to 100,000 pyeong (approximately 330,000 square meters) by 2026 from the current about 40,000 pyeong, increasing annual production to 4.39 million units (currently about 2 million units). It is also accelerating the development of eco-friendly technologies, such as obtaining 'Hydrogen Ready Certification' in the UK. The Hydrogen Ready Certification certifies that boilers operate safely even with city gas mixed with 20% hydrogen. Kyungdong Navien is also participating in a hydrogen village project that pilots the use of hydrogen boilers.