[Click e-Stock] "Hyosung Heavy Industries Delivers Earnings Surprise... Target Price Up 24%"

LS Securities has raised its target price for Hyosung Heavy Industries by 24% and maintained its buy recommendation, following the company's earnings surprise in the fourth quarter of last year.

On this day, Sung Jonghwa, a researcher at LS Securities, stated, "We are raising the target price for Hyosung Heavy Industries from 2.82 million won to 3.5 million won, an increase of 24%, reflecting a 15% upward revision in the 2026 earnings per share (EPS) forecast and an 8% increase in the price-to-earnings ratio (PER) applied. We maintain our buy recommendation."

In the fourth quarter of last year, Hyosung Heavy Industries reported consolidated sales of 1.734 trillion won, up 11% year-on-year, and operating profit of 260.5 billion won, a 97% increase, continuing its growth trend.

Sung noted, "Operating profit delivered a significant surprise, far exceeding the consensus forecast, which had been unexpectedly revised downward in early to mid-January. Even compared to our own updated projections, which had incorporated the latest developments up to the second preview, sales were in line, but operating profit was significantly higher." He added, "Excluding one-off provisions for bad debt, actual operating profit reached 285.5 billion won (an operating margin of 16.4%), representing a super surprise."

Notably, the heavy industries division continued to perform strongly. In the fourth quarter of last year, the division posted record quarterly results, with sales of 1.2136 trillion won (up 14%), operating profit of 244.7 billion won (up 112%), and an operating margin of 20.2% (up 9.4 percentage points). Orders for the heavy industries division during the same period reached 1.9658 trillion won, a 152% increase year-on-year.

The construction division underperformed, with sales of 529.4 billion won (up 4%), operating profit of 15.8 billion won (down 7% year-on-year), and an operating margin of 3.0% (up 0.3 percentage points). However, Sung analyzed, "If we exclude the one-off provision for bad debt of 25 billion won, operating profit would be 40.8 billion won (up 140%), and the operating margin would be 7.7% (up 4.4 percentage points), which is actually a significant improvement compared to the same period last year (YoY)."

Sung further stated, "Even based on current consolidated fundamentals, Hyosung Heavy Industries is already at a significant advantage compared to global competitors. If we also consider the potential for a mid- to long-term turnaround in the construction division, the company's fundamentals become even more favorable relative to global peers." He continued, "A significant premium over global competitors would be justified, but the new target price PER only applies a 15% premium, which is sufficiently reasonable from a valuation perspective."