[Edaily Reporter Kwon Oh Seok ] SKSecurities announced on the 16th that it is maintaining its “Buy” investment rating on HYOSUNG HEAVY INDUSTRIES(298040)but lowering its target price from 4.7 million won to 4 million won.

Na Min-sik, an analyst at SKSecurities, explained, “We believe the stock price, which has corrected by about 40% from its peak, is the result of supply-and-demand issues rather than a deterioration in fundamentals. The narrative surrounding AI (artificial intelligence) power infrastructure itself remains intact, and the supply-demand imbalance is of a nature that can be resolved in the long term; therefore, the current stock price is undervalued.” However, he added, “We have lowered the target price to reflect the decline in the stock price.”
He projected that second-quarter earnings would meet consensus estimates. “There are two key points to watch,” he analyzed. “First, there is the variable of delayed revenue recognition in the Middle East. Some projects may be delayed due to the U.S.-Iran conflict. However, since the Middle East market accounts for just over 10% of total revenue and is primarily focused on Saudi Arabia, we view this not as a structural risk but as quarterly earnings noise.”
He added, “There is also the possibility of an upward revision to the order intake guidance. Following a record high in new orders (4.2 trillion won) in the first quarter, competitors have raised their guidance. We believe it is highly likely that HYOSUNG HEAVY INDUSTRIES will also revise its guidance upward.”
Analyst Na emphasized, “The company plans to simultaneously produce transformers and ultra-high-voltage circuit breakers in the U.S. through a joint venture with Quanta Service. In particular, it will produce GCBs (gas-insulated circuit breakers). Since GCBs use insulating gas, they can be made smaller, which allows for more efficient use of substation land.”
He added, “Our partner, Quanta Service, emphasizes that the 765kV transmission grid market is poised for structural growth. To prepare for this, it is securing a supply chain within the U.S. by acquiring the Pennsylvania Transformer Plant (PTT).” He continued, “However, we believe the joint venture was formed because it is difficult to meet U.S. demand for 765kV equipment with its own production capacity alone.”