[Edaily Reporter kyoungeun kim ] HYOSUNG HEAVY INDUSTRIES(298040)Forecasts indicate that Hyosung Heavy Industries will post third-quarter earnings that fall short of market expectations due to transportation disruptions and one-time costs. Although the target price has been significantly lowered due to weakness in the power equipment sector, analysts assess that the company’s fundamentals remain solid thanks to robust demand for power infrastructure.

Na Min-sik, an analyst at SKSecurities, maintained a “Buy” rating on HYOSUNG HEAVY INDUSTRIES in a report on the 19th but lowered the target price from 4 million won to 2.5 million won. The closing price on the 16th was 1,926,000 won.

Analyst Na estimated HYOSUNG HEAVY INDUSTRIES’ third-quarter revenue at 1.98 trillion won, a 21.9% increase year-over-year, and operating profit at 277 billion won, up 26.1%. The operating profit margin is 14.0%. While revenue is expected to meet the consensus estimate (1.903 trillion won), operating profit is projected to fall 10.6% short of the consensus (310 billion won).

Two factors were cited as the causes of the underperformance. Analyst Na explained, “Revenue recognition has been partially delayed due to shipping disruptions caused by geopolitical uncertainty in the Middle East and delivery schedule adjustments for high-margin projects in North America, and one-time costs resulting from rising projected costs in the construction sector will be reflected.”

However, the firm determined that there is no need to revise next year’s profit outlook based solely on this quarter’s earnings fluctuation. Analyst Na stated, “The revenue deferral stems from a timing difference in revenue recognition due to client schedule adjustments,” adding, “It is difficult to find evidence that demand for power infrastructure has slowed.” He further analyzed, “Looking at Quanta Service’s order backlog data, demand is actually accelerating.” Quanta Service’s order backlog in the power sector at the end of the second quarter stood at $43.79 billion, up 44.6% year-over-year—a higher growth rate than in the first quarter (35.1%). Analyst Na added, “This is because, in addition to existing utility investments, projects related to artificial intelligence data centers (AIDC) are underway,” noting, “HYOSUNG HEAVY INDUSTRIES is also expanding its customer base by successfully securing orders from U.S. Big Tech companies.”

The target price was lowered by adjusting the multiples. While maintaining the 2027 estimated earnings per share (EPS) of 125,258 won, the target price-to-earnings ratio (PER) was lowered from 32x to 20x. Analyst Na noted, “Within the AI infrastructure sector, the power equipment industry continues to underperform relative to others,” and assessed that “the mere existence of bottlenecks is not sufficient to justify an additional valuation premium in the short term.” He continued, “It is presumed that the market is seeking to confirm the pace at which the company is converting its accumulated order backlog into revenue.”