[Reporter Reading Securities Report] Uyang H.C. to Join Trump 2.0

Plant Specialist with 91% Overseas Sales Ratio
Expected to Benefit from Trump's Energy Development Promotion Policy

Plant specialist company Wooyang HC is about to merge with KB No.26 SPAC. Wooyang HC is expected to benefit from the Trump 2.0 era, as Trump is anticipated to strengthen investments in traditional energy sources such as fossil fuels.

According to the financial investment industry on the 24th, Wooyang HC plans to enter the KOSDAQ market by absorbing KB No.26 SPAC. The merger price is set at 12,342 KRW for the merged entity Wooyang HC and 2,000 KRW for the absorbed KB No.26 SPAC. The market capitalization upon listing is expected to reach 179.5 billion KRW.

Founded in 1993, Wooyang HC's business segments are divided into ▲Chemical Plant ▲Power Plant ▲Environmental Plant. The chemical plant segment supplies oil and gas-based plant equipment. The power plant segment handles main and auxiliary equipment (BOP - Balance of Plant) necessary for power generation facilities. The environmental plant segment focuses on energy-saving solutions.

As of the third quarter of last year, sales and operating profit were 146.72583 billion KRW and 32.45904 billion KRW, respectively. While sales slightly decreased compared to the same period the previous year, operating profit increased by 101.53%. One of Wooyang HC's characteristics is its high profit margin. As of the third quarter last year, the gross profit margin was 30.13%, operating profit margin was 22.12%, and net profit margin was 17.77%. These figures are approximately 13%, 16%, and 14% points higher than the industry average, respectively. A company representative explained, "We adopt a project order strategy focused on high-quality construction, concentrating on highly profitable projects," adding, "This plays an important role in achieving higher profit margins compared to competitors."

However, order backlog has decreased from 140 billion KRW in 2023 to 100 billion KRW last year. This is due to the freeze on approvals for new LNG export plants implemented by former U.S. President Joe Biden. The company has set its order target for this year at 180 billion KRW. A company representative stated, "Due to the Biden administration's suspension of new U.S. LNG project permits, some expected construction projects were put on hold, temporarily reducing order volume."

Among the company's business areas, Small Modular Reactors (SMR) are also promising. SMRs are gaining attention as future power sources for artificial intelligence (AI) data centers. Wooyang HC is collaborating with domestic construction companies on the design and development of BOP components such as heaters, condensers, and deaerators used in SMR energy plants. Recently, the company has also been working with major domestic shipbuilders to promote the construction of SMRs for offshore power generation.

A company representative emphasized, "By registering with Korea Hydro & Nuclear Power last year, we obtained qualifications to manufacture nuclear BOP equipment," adding, "Although immediate visible results are difficult to expect, once the SMR business is in full swing, we anticipate rapid commercialization based on our prepared technology and experience."

Wooyang HC is expected to enjoy a Trump boom. President Trump recently declared a national energy emergency at his inauguration. He also revoked the offshore oil and gas leasing ban that prohibited drilling along most U.S. coastlines, promoting energy development in the U.S. The freeze on LNG export plant approvals was also lifted. These directions are favorable for Wooyang HC, as most of its sales (91%) come from exports, with 63% of that from the Americas.

According to the securities registration statement, "The first Trump administration actively supported shale gas field development and petrochemical plant projects, significantly increasing demand for chemical plant equipment, which positively affected the merged entity," and "Upon re-election, support for the traditional fossil fuel industry is likely to strengthen, leading to increased demand for chemical plant and LNG equipment for the merged entity."

A company representative also emphasized, "The core of the Trump administration's energy policy can be summarized as 'revitalization of the oil and gas industry, expansion of nuclear energy, and activation of the plant industry,'" adding, "As energy policies strengthen, large-scale LNG plant orders are expected in the U.S., providing new order opportunities for us, given our excellent track record in LNG plant construction."