[Click e-Stock] "BHI Achieves Both Growth and Profitability... Target Price Raised"

Shinhan Investment Corp. Raises BHI Target Price to 110,000 Won

On August 20, Shinhan Investment Corp. stated that BHI has achieved both top-line growth and improved profitability in the second quarter, raising its target price from 100,000 won to 110,000 won while maintaining a 'Buy' investment rating.

BHI posted second-quarter sales of 296.3 billion won (+75.0% year-on-year) and operating profit of 45.5 billion won (+123.1%), both surpassing the market consensus of 247.8 billion won in sales and 29.7 billion won in operating profit.

Sales from the Heat Recovery Steam Generator (HRSG) business reached 186.7 billion won (+80.7%), marking another substantial growth following the first quarter. Boiler sales also recorded strong results at 61.5 billion won (+125.9%), driven by revenue recognition from the 517.7 billion won-worth circulating fluidized bed boiler order received from the Philippines last year. The Balance of Plant (BOP) for nuclear power also saw a significant increase to 16.8 billion won (+2059.3%) due to revenue recognition for the Shin Hanul Units 3 and 4.

The operating profit margin improved to 15.4%, up 3.4 percentage points year-on-year. This was mainly attributed to reduced cost burdens from improved purchasing power, mitigation of fixed costs due to top-line growth, and the recognition of high-margin projects won last year. Net profit was 20.3 billion won (-32.0%), impacted by losses on derivatives transactions caused by the rise in the won-dollar exchange rate. However, if the current exchange rate levels persist, a valuation gain on derivatives could occur in the third quarter, potentially offsetting part of the losses.

Shinhan Investment Corp. reflected rapid sales growth, increased share of high-margin projects, cost improvements, and operating leverage effects in its updated projections, raising its annual operating profit estimates for this year and next year by 27.1% and 23.5%, respectively. Estimated operating profit is now 157.5 billion won for this year and 189.5 billion won for next year.

Seunghoon Han, a research analyst at Shinhan Investment Corp., said, "Expansion of the order regions is key to future stock re-rating," adding, "Currently, HRSG orders are mainly from Asia and the Middle East, with domestic large-scale nuclear power projects driving most of the sales in the nuclear BOP sector." He further added, "Expanding the order pipeline to Europe and North America in the future is expected to serve as momentum for the stock price."

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