[Click eStock] "Daehan Electric Wire, Profit Margin Improvement to Accelerate from Second Half"

Order Backlog Expansion...
Rising Profit Margins as Overseas Share Increases

Daehan Electric Wire's order backlog continues to reach record-high levels and is expected to be gradually reflected in its performance. Along with the expansion of the sales proportion of ultra-high voltage and submarine cables in the second half of the year, both revenue and profit margins are anticipated to improve.

On the 18th, Hana Securities newly issued a 'Buy' investment opinion on Daehan Electric Wire with a target price of 16,000 KRW. The closing price the previous day was 12,750 KRW.

Daehan Electric Wire recorded new orders worth 3.7 trillion KRW last year, and its order backlog is also at a record high of around 2.8 trillion KRW. This is due to the increase in power demand, which has driven up demand not only for transmission facilities but also for ultra-high voltage cables. Medium- to long-term order expansion is also expected. In addition to ultra-high voltage projects ordered in the fourth quarter of last year in Singapore and Sweden, there are many opportunities in Taiwan, Europe, and other regions. As the overseas proportion of the order backlog increases in regions such as the Americas and Europe, profit margins are expected to improve.

This year, annual sales are estimated at 3.602 trillion KRW, with operating profit of 134.8 billion KRW. These figures are expected to increase by 9.7% and 17.6%, respectively, compared to the same period last year. The volume of high unit price orders will be reflected in performance with a time lag, leading to growth in scale. Sales from the domestic Yeonggwang Nakwol offshore wind power project are also expected to be recognized starting this year.

Although profitability recovery in the domestic and international medium voltage (MV) cable market may be difficult due to intensified competition, steady demand and the possibility of a relative decrease in MV production share among major manufacturers suggest long-term growth prospects. In the past, performance volatility was high due to one-time costs such as bonuses and provisions, but this year, these costs will be allocated and reflected on a quarterly basis, stabilizing quarterly profit trends.

Capacity expansion is also underway. Once the submarine cable production plant is completed, production capacity is expected to expand more than fivefold to 18,000 metric tons (MT) compared to the existing capacity. This will be sufficient to handle both domestic and overseas volumes. Yuje-seon, a researcher at Hana Securities, analyzed, "By increasing the number of submarine cable laying vessels from one to two by 2028 and leveraging the competitive advantage in turnkey project execution capabilities, market share expansion is expected. Although initial learning costs for new products entering overseas markets may occur, being highlighted as a new supplier in a market dominated by a few companies will allow sharing of the high margins formed in the market."