[Click e-Stock] "HD Hyundai Electric: Industry Still in Upward Cycle... Target Price Lowered"

Target Price Lowered from 4.8 Million Won to 4.2 Million Won

On April 23, Shinhan Investment Corp. stated that despite concerns over tariffs, the industry cycle for HD Hyundai Electric remains in an upward phase. The firm lowered its target price from 4.8 million won to 4.2 million won but maintained its 'Buy' investment rating.

Lee Dongheon, a researcher at Shinhan Investment Corp., explained, "For 2025 and 2026, we applied an average price-to-earnings ratio (PER) of 21.8 times to the average earnings per share (EPS) of 19,300 won (-5%) for the three major domestic power equipment companies, with a 20% premium (down from the previous 30% premium)." He added, "Despite concerns about a peak-out and tariffs, the industry is still in an upward cycle."

HD Hyundai Electric is expected to post its highest-ever quarterly results in the first quarter of this year. Lee said, "First-quarter revenue is projected to reach 1.0147 trillion won, up 27% year-on-year, with operating profit rising 69% to 218.2 billion won and the operating margin increasing by 5.4 percentage points to 21.2%. This would mark the company's highest-ever quarterly results and its first time surpassing 1 trillion won in quarterly revenue." He also noted, "Compared to the consensus (average of securities firms' forecasts), revenue and operating profit are expected to exceed by 5% and 7%, respectively."

The increase in profit margin is lagging behind the growth in revenue. Lee analyzed, "The share of North American revenue rose to 38% in the first quarter, but the operating margin declined compared to the second quarter of last year, which can be attributed to a mix issue." He added, "From the second quarter onward, profit margins are expected to gradually improve."

He believes the impact of tariffs will not be significant. Lee said, "While clear negotiations with customers regarding general and reciprocal tariffs have not been completed, it should be possible to pass on tariffs to major customers." He continued, "Tariffs may affect profit margins starting from the second quarter, but the impact is not expected to be significant." He also added, "Despite the application of North American tariffs and various noises, the company remains in a growth phase. Although we need to monitor the situation through the second quarter, we believe the stock price adjustment has been sufficient."