[Click e-Stock] "HD Hyundai Electric: Need to Confirm Profitability Holds Up Despite FX Headwinds... Target Price Cut"

SK Securities lowered its target price for HD Hyundai Electric to KRW 650,000 from KRW 900,000 on Monday, saying the company needs to maintain profitability and demonstrate additional earnings growth despite foreign exchange headwinds. It maintained its “Buy” rating.

“Despite the outlook for medium- to long-term earnings growth, share prices of power equipment manufacturers remain weak, so we believe the applied multiple should be adjusted conservatively in the short term,” said Na Min-sik, a researcher at SK Securities. “We took into account the recent decline in multiples across the power equipment sector due to foreign exchange effects.” He added, “For the share price to rebound, it will be important to confirm that the profitability of high-margin transmission equipment is maintained despite foreign exchange headwinds and that distribution equipment contributes additional earnings.”

HD Hyundai Electric is expected to report third-quarter revenue of KRW 1.113 trillion, up 11.8% year over year, and operating profit of KRW 297 billion, up 20.4%, in line with market forecasts. “The main short-term variable for earnings is the decline in the won-dollar exchange rate, which could weigh on translated revenue and profitability,” Na said. “On the other hand, increased shipments of high-margin transformers should help defend profitability. As revenue recognition for high-margin transmission equipment continues, it will be important to watch how much the product mix offsets foreign exchange headwinds.”

Despite short-term foreign exchange headwinds, the upward trend in medium- to long-term earnings is expected to continue. “We expect the revenue base to expand as growth in distribution and rotating equipment adds to revenue recognition for high-margin transmission equipment,” Na said. Expanded supply to North American artificial intelligence (AI) data centers is a key growth driver for distribution equipment. Repeated production for large-scale projects could also improve productivity. For rotating equipment, increased supply linked to engine orders from group companies is expected to support earnings. Accordingly, a larger share of distribution and rotating equipment is expected to boost company-wide revenue.

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