[Click e-Stock] "Taihan Electric Wire Secures Turnkey Capabilities for Submarine Cables"

On August 4, Yuanta Securities maintained its "Buy" investment rating and target price of 20,000 won for Taihan Electric Wire, stating that the company has established turnkey capabilities across all processes, including submarine cable production and installation. As of August 1, the closing price was 15,110 won.

Son Hyunjung, a researcher at Yuanta Securities, commented on the same day, "Through the acquisition of Ocean CNI, Taihan Electric Wire has secured capabilities related to submarine cables."

In the second quarter, Taihan Electric Wire recorded sales of 916.4 billion won, up 6.0% year-on-year, marking a new quarterly record. The company's external growth was driven by increased shipments of extra-high voltage cables to North America and the Middle East, the full-scale launch of charter sales, and improved performance of subsidiaries. Operating profit was 28.6 billion won, down 23.6%, due to one-off costs related to prototype production at Plant 1. However, the expansion of high-margin product share led to an improvement compared to the previous quarter. The operating profit margin was 3.1%.

The industrial cable segment contracted due to project delays in North America and weak domestic demand, while the materials and other segment was partially affected by factors such as a decline in the exchange rate, despite increased charter revenue. Subsidiaries saw improved results, particularly those based in Saudi Arabia and Vietnam.

Last month, Taihan Electric Wire acquired Ocean CNI, thereby securing capabilities for submarine cable laying and burial. This enables the company to offer turnkey solutions for submarine cables. Son noted, "Construction of the second submarine cable plant will begin in the third quarter, with mass production targeted for 2028. We expect a first-mover advantage as floating offshore wind power expands."

He added, "The Yeonggwang Nakwol project is scheduled to begin internal network installation this month, so submarine cable revenue recognition is expected from the third quarter onward. The order backlog for the second quarter stands at 2.8907 trillion won (up 44.1% year-on-year), and it is highly likely to surpass 3 trillion won if large project orders are reflected in the third quarter." Currently, extra-high voltage orders in North America account for as much as 20% of the order composition, so revenue recognition focused on profitability is expected to accelerate in the second half of the year.

Regarding the annual outlook, Son forecast, "This year's sales will reach 3.6085 trillion won (up 9.6% year-on-year), and operating profit will be 125.2 billion won (up 8.7%). The trend of improving profitability continues as the share of high value-added orders, centered on extra-high voltage and submarine cables, expands. From the second half of the year, further contributions are expected from expanded production capacity (CAPA) and submarine construction revenue."

On the issue of the 50% tariff on copper products in the United States, he said, "There may be some short-term order delays, but considering local customer price adjustments and long-term contract structures, the actual impact is limited. In the mid- to long-term, localization strategies within North America are being considered as alternatives," he added.