[Weekend Money] "Wind Power Sector Entering Recovery Phase"...Which Stocks Are Analysts Watching?

Shinhan Investment Corp. Recommends "Overweight" on Wind Power Sector
Names CS Wind as Top Pick; LS Highlighted as Stock to Watch

On August 29, Shinhan Investment Corp. recommended an "overweight" rating on the wind power sector, noting that the industry is entering a gradual recovery phase, further supported by government supply chain support policies.

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Last year, global new wind power installations reached a record-high 164.6 gigawatts. However, more than 70% of this was driven by China, and onshore wind power accounted for 94%, suggesting that the recovery in the non-Chinese and offshore wind power equipment sectors remains limited. New final investment decisions (FIDs) for offshore wind projects remain subdued due to a combination of low-cost fixed contracts signed in 2020–2021, followed by increases in capital expenditures (CAPEX) and interest rates.

In this context, signs of recovery are emerging in the European market. Across Europe, contract prices are rising, contracts are increasingly linked to inflation, and contract periods are being extended. Projects that have already passed FID are now advancing with CAPEX execution. Min-Ki Choi, an analyst at Shinhan Investment Corp., commented, "Currently, onshore wind power is recovering first, while the offshore wind segment is in a gradual and selective recovery phase, as we must confirm whether price renegotiations lead to actual FIDs and finalized equipment orders."

The outlook is for a sequential recovery in equipment markets. Orders for wind power equipment typically begin with turbines once a project’s FID and construction start is secured, then spread across the value chain. Shinhan Investment Corp. explained that turbine OEMs are experiencing improved profitability due to normalized pricing and the depletion of low-margin order backlogs, with subsequent benefits expected to follow for tower and bearing OEMs in line with additional order placements.

Within the offshore wind value chain, subsea cables are in steady, structural demand, not only for wind power but also for high-voltage direct current (HVDC) transmission, cross-border interconnectors, and power grid expansion. In the case of substructures, after a supply-favorable period from 2027 to 2028, a marked turnaround in performance is anticipated as offshore wind projects in Europe and Asia recover.

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In the domestic wind power market, sector improvement is expected on the back of policy changes. To date, the local market has lagged due to comparatively high generation costs, bottlenecks in grid connection and permitting, and weak financial procurement conditions. Last year, renewable energy represented only 9.7% of Korea’s power generation mix, well below the OECD average of 35.3%. Wind power’s share was just 0.6%—less than one-tenth the global average.

Shinhan Investment Corp. emphasized that government-led institutional changes in the wind power market could be a gamechanger. At a forum on August 26 for the 12th Basic Plan for Long-Term Electricity Supply and Demand, the government unveiled a projection that would expand provisional wind power deployment from 9.2 GW in 2030 to 60.5 GW by 2040. Analyst Choi explained, "Compared to the 18.3 GW target for 2030 set at the 11th meeting, this new structure is more realistic in the near term, but presumes aggressive expansion of offshore wind from then on." He also pointed out that restructuring of the Renewable Portfolio Standard (RPS), policy finance initiatives, and domestic supply chain support policies are expected to further underpin sectoral improvement.

Based on this analysis, Shinhan Investment Corp. named CS Wind as its top pick in the wind power sector. Analyst Choi reasoned, "CS Wind has the fastest exposure to the recovery of onshore wind orders from Western turbine OEMs and, with production bases and a diversified client base in the U.S. and Europe, is well-positioned to address local sourcing and logistics barriers. While reductions in U.S. tax credits and price cut demands from OEMs represent risks, the potential easing of competition among local tower suppliers could partially offset these concerns."

Meanwhile, SK Oceanplant and LS Marine Solution were highlighted as key beneficiaries of a recovery in domestic offshore wind, while LS was picked as a stock of interest due to its improving performance from a shift towards a subsea cable-focused business mix.

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