[Edaily Reporter PARK MIN ] On the 2nd, Yuanta Securities Korea analyzed that while HYOSUNG HEAVY INDUSTRIES’ third-quarter earnings temporarily stagnated due to logistics disruptions and one-time costs in the construction division, the company is expected to achieve its highest-ever quarterly earnings in the fourth quarter as deferred high-margin orders are reflected. In particular, the firm assessed that the outlook for earnings growth beyond 2027 has become significantly brighter due to an expansion in orders for 765-kilovolt (kV) ultra-high-voltage transformers, primarily in the U.S.

The firm maintained its “Buy” rating and target price of 4.2 million won. Based on the previous trading day’s closing price (1,809,000 won), the stock has upside potential of 132%.

Son Hyun-jung, an analyst at Yuanta Securities Korea, stated in a report published today, “HYOSUNG HEAVY INDUSTRIES’ third-quarter consolidated revenue increased 7.2% year-over-year to 1.7406 trillion won, while operating profit rose 10.8% to 243.5 billion won (operating margin of 14.0%), falling 7.5% short of our estimates.”

External logistics factors and rising construction costs were cited as the reasons for the temporary slowdown in earnings.

Analyst Son “The Heavy Industries division posted an operating profit of 235.7 billion won (operating profit margin of 19.8%). However, due to logistics disruptions caused by a hurricane in the U.S. and delivery schedule adjustments in the Middle East and the U.K., sales totaling 260–270 billion won—including approximately 140 billion won worth of high-margin gas-insulated switchgear (GIS) for U.S. nuclear power plant operators—were deferred to the fourth quarter,” adding “If this volume had been properly reflected, operating profit for the Heavy Industries segment would have exceeded 300 billion won,” he analyzed.

He went on to explain, “In the construction division as well, although cost increases of approximately 40 billion won occurred at a specific site, these were offset by profits from other projects, resulting in a net impact of about 22.5 billion won; the likelihood of further cost increases is low.”

Yuanta Securities Korea forecast that HYOSUNG HEAVY INDUSTRIES’ fourth-quarter earnings rebound would be very steep.

Analyst Son predicted, “Fourth-quarter operating profit for the Heavy Industries division will exceed 400 billion won, setting a new quarterly record,” adding, “Profitability will improve significantly as high-margin GIS orders and additional sales in the U.S. and Europe gain momentum.” He added, “Cumulative new orders for the first three quarters of this year reached 10.7 trillion won, achieving 89% of the annual target (12 trillion won), making it highly likely that the annual target will be exceeded.”

He cited the surging demand for 765kV ultra-high-voltage power equipment as a key driver of medium- to long-term growth. In the third quarter, new orders for the Heavy Industries division surged 122% year-over-year to 3.23 trillion won, while the order backlog rose 71% to 18.9 trillion won, setting a new all-time high.

Analyst Son noted, “The U.S. accounts for 60% of the total order backlog, and the backlog for 765 kV transformers alone amounts to approximately 1.9 trillion won,” adding, “Negotiations are underway for additional orders exceeding twice the volume currently secured.” He continued, “Following direct orders in September for 765 kV and 345 kV transformers from major cloud and data center operators (hyperscalers), the company has secured approximately 300 billion won worth of static var compensators (STATCOMs, voltage stabilizers) for the U.S. 765 kV transmission grid, indicating that product diversification is proceeding smoothly.”

The effects of expanding production capacity (CAPA) are also expected to become visible in stages. Analyst Son explained, “The annual production capacity of the Memphis, U.S., plant will increase to $400 million by the end of this year, fully reflecting in earnings starting in 2027, and will expand to $700 million by June 2028,” adding, “We are also reviewing plans to expand production of ultra-high-voltage transformers in Changwon and distribution transformers for U.S. data centers.”

He emphasized, “As the conversion of high-margin order backlog into revenue aligns with the effects of facility expansions, consolidated operating profit in 2027 is expected to surge 61.5% year-over-year to 1.7358 trillion won (operating profit margin of 18.1%).” He added, “Given the clear visibility of earnings growth, there is ample room for a stock price revaluation.”