This Stock Plunged 30% in a Month... The Key to a Turnaround Is [Weekend Money]

Profit Taking Drives Power Equipment Stocks Down 38% on Average from a Month Ago
Second Quarter Earnings and Order Results Expected to Spark Rebound Momentum

The adjustment phase in the power equipment sector continues. This is the result of profit-taking pressure combined with a rotation of funds, and it is expected that second quarter earnings and order flows in the second half of the year will change the overall sentiment.

According to NH Investment & Securities, based on the 2028 earnings forecasts, the price-to-earnings ratio (PER) of domestic power equipment companies has dropped to 22 times, which is now lower than the average of 23 times for overseas competitors, after just one quarter. Minjae Lee, a researcher at NH Investment & Securities, explained, "The share prices of domestic power equipment companies have fallen by an average of 38% compared to one month ago," adding, "In particular, HD Hyundai Electric and Hyosung Heavy Industries, which focus on ultra-high voltage transformers, have dropped by more than 30% compared to three months ago."

The recent adjustment in power equipment stocks has been attributed to profit-taking pressure, among other factors. Hyunjung Son, a researcher at Yuanta Securities, said, "The recent adjustment in the power equipment sector is not due to a peak-out in the industry cycle, but rather a result of profit-taking pressure following a sharp rise in the first half of the year, combined with a rotation of funds within the artificial intelligence (AI) theme." She further explained, "Funds have moved into large-cap semiconductor stocks, and redemptions from power equipment exchange-traded funds (ETFs) have led to basket sales, which expanded the decline in share prices." She added, "Looking at new orders in the first quarter, order backlogs, the proportion of North American sales, and margin trends, there are only limited signs of fundamental deterioration."

A shift in sentiment is expected with the arrival of the second quarter earnings season. Lee commented, "At the time of the first quarter earnings announcements, domestic power equipment companies attracted attention for their steep improvement in results and expansion of orders, raising expectations for stronger mid- to long-term growth potential compared to overseas competitors." He continued, "The growth trend is expected to continue in the second quarter earnings announcements, and considering the high exchange rate and seasonal effects, there is a high possibility that results will exceed the consensus (the average of securities companies’ forecasts)."

Orders centered on the U.S. market and big tech (large information technology companies) are also expected to continue. Son noted, "While data centers can be constructed within 18 to 24 months, transmission grids and substations require three to seven years. This time gap is creating bottlenecks in grid connections and is generating simultaneous demand for ultra-high voltage transformers, switchgears, and onsite power generation." She added, "Downstream demand is also becoming more concrete, as big tech capital expenditures (CAPEX) continue to trend upwards, and utilities are expanding their CAPEX in response to increased data center contract loads. Accordingly, new orders in 2026 are highly likely to exceed the existing company guidance." She went on to say, "In the second half, it is expected that the market will become more selective, focusing on companies where upward revisions to order guidance and earnings per share (EPS) can be confirmed."

This content was produced with the assistance of AI translation services.