Higher Stock Price Growth Than HD Hyundai Electric in the First Half of Last Year
Stock Price Down 21% This Month... Concerns Over Decreased Orders
Operating Profit Down 48.9% in Q4 Last Year
In the domestic stock market, Jeryong Electric, which led the power equipment sector's rally along with HD Hyundai Electric in the first half of last year, has been plummeting since the beginning of this month. Investors who reviewed the fourth-quarter results last year expressed concerns about the slowing growth pace of Jeryong Electric. Although transformer demand is increasing due to rising power demand in the United States, intensified competition is showing signs of deteriorating profitability for Jeryong Electric.
According to the financial investment industry on the 10th, Jeryong Electric's stock price has fallen 21.1% since the beginning of this month. Considering that the KOSDAQ index rose 2% during the same period, the return relative to the market is a poor -23.1 percentage points (P). Institutional investors and foreigners recorded cumulative net sales of 9.2 billion KRW and 7.5 billion KRW, respectively.
Jeryong Electric manufactures transformers used to adjust voltage. Exports account for more than 90% of total sales. Last year, the company achieved sales of 262.7 billion KRW and operating profit of 97.8 billion KRW, increasing by 42.8% and 39.4%, respectively, compared to the previous year. In the fourth quarter of last year, sales were 50.8 billion KRW, and operating profit was 12.7 billion KRW, down 22.8% and 48.9%, respectively, compared to the same period the previous year.
Exports increased due to rising power demand and aging power grids in the United States. However, after rapid growth until the third quarter, momentum slowed in the fourth quarter. Kim Taehyun, a researcher at IBK Investment & Securities, explained, "Competition intensity in the U.S. distribution transformer market is increasing, causing a slowdown in order flow, exports to the U.S. have decreased, and one-time year-end costs occurred."
The shortage of distribution transformers, which is Jeryong Electric's main focus, appears to have eased considerably. Orders related to large projects are decreasing. Additionally, competitors in the distribution transformer market are lowering prices to enter the U.S. market, which is also putting pressure on Jeryong Electric's profitability. Jeryong Electric is considering ways to increase exports of ground transformers, which have relatively high technical barriers.
Previously, Jeryong Electric's stock price surged 356% in the first half of last year, surpassing HD Hyundai Electric's 277% increase during the same period. In the first half of last year, sales and operating profit increased by 87% and 107%, respectively, compared to the same period the previous year. While it led the rise of power equipment companies, unlike HD Hyundai Electric, which has maintained an upward trend since the second half of last year, Jeryong Electric's stock price has been declining. Unlike Jeryong Electric, which focuses on distribution transformers, HD Hyundai Electric mainly exports ultra-high voltage transformers. HD Hyundai Electric's sales and operating profit in the fourth quarter increased by 2.3% and 33.4%, respectively, compared to the same period the previous year.
Power equipment includes power transformers and high-voltage (above 50kV) circuit breakers needed in the generation and transmission stages, as well as distribution equipment such as switchboards and medium- and low-voltage circuit breakers applied to medium voltage (1?50kV) and low voltage (below 1kV). High-voltage products emphasize product reliability, making previous delivery records important. In contrast, low-voltage products are mass-produced standard products rather than made-to-order, resulting in relatively low entry barriers and active market participation by latecomer companies.
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