After Boilers Come Air Conditioners... Kyungdong Navien Target Price Raised [Click eStock]

Expansion of Market Share Through Hybrid Water Heaters and Entry into HVAC
Securing Mid- to Long-Term Earnings Support with HVAC Expansion

Kyungdong Navien is expected to show strong growth driven by new products and businesses, in addition to its solid second quarter performance this year, according to recent analysis.

On the 13th, according to Shinhan Investment & Securities, researcher Heo Sungkyu stated the previous day, "Kyungdong Navien is currently trading at a price-to-earnings ratio (PER) of around 6 times, a historically low valuation, even excluding one-off refunds," maintaining a 'buy' investment opinion and raising the target price by 23.6% from 89,000 won to 110,000 won.

In the second quarter of this year, Kyungdong Navien posted sales of 388.2 billion won, down 1.0% year-on-year, and operating profit of 84.2 billion won, a 64.6% increase from the same period last year. Researcher Heo commented, “Even considering the base effect of advance orders in the second quarter last year, the company delivered a solid performance. Profitability saw a significant boost as about 85% of universal tariff payments made last year were refunded in the form of a deduction from the cost of goods sold.”

The launch of new products not held by competitors in the North American market is cited as the main driver behind Kyungdong Navien’s market share expansion. The North American water heater market is currently divided between gas tank and tankless products. Kyungdong Navien initially entered the market with tankless high-efficiency water heaters, and recently introduced electric-based heat pump water heaters and electric-gas hybrid water heaters.

In particular, electric water heaters, which offer higher heat efficiency compared to gas models, are eligible for policy support. The hybrid water heaters are expected to capture households currently using gas water heaters, based on their superior COP (coefficient of performance), which refers to the amount of heat produced per 1kWh of electricity. Researcher Heo evaluated, “We are seeing a scenario where Kyungdong Navien is taking market share from competitors more than four times larger in scale.”

Expansion into the HVAC (Heating, Ventilation, and Air Conditioning) market is also expected to serve as a mid- to long-term growth driver. The HVAC market is more than ten times larger than the total water heater market. Kyungdong Navien began to generate related revenue of approximately 7 billion won starting in July.

By building a portfolio of heating and cooling equipment such as hydro furnaces and air handlers, Kyungdong Navien is positioned to take market share from competitors in the water heater segment while quickly expanding its presence in the HVAC market as well. Researcher Heo added, “Average selling prices and margin rates in HVAC are higher than for water heaters, and entry into the HVAC market will serve as a mid- to long-term factor supporting performance on the downside.”

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