Brokerages raise HD Hyundai Electric target price on higher demand

[Courtesy of HD Hyundai Electric]

South Korean securities firms are raising their target prices for HD Hyundai Electric Co., an electric power equipment-making unit of HD Hyundai Group, the country’s shipbuilding, oil refining and machinery conglomerate, on expectations of improved profitability.

Samsung Securities Co. on Monday raised the target price to 77,000 won ($59.22) from 63,000 won as HD Hyundai Electric’s profitability is expected to improve in the second half of this year on the back of higher sales price of transformers in the U.S. and robust demand.

“HD Hyundai Electric has disclosed four orders this year, which suggests that demand for large-scale and long-term supply contracts is on a rise,” said Han Young-soo, an analyst at Samsung Securities.

Disclosure obligations are only required for orders exceeding 2.5 percent of the previous sales.

Shinhan Investment & Securities Co. also raised its target price for HD Hyundai Electric to 72,000 won from 66,000 won last month.

Lee Dong-heon, an analyst at the brokerage house, said that there are expectations of improved profitability thanks to increased orders and a surge in sales prices.

“As the order backlog grows, the company will be able to maximize the effect of reducing fixed costs following the outward growth as shown during the boom period around 2010,” Lee said.

HD Hyundai Electric’s main source of revenue comes from electric power equipment such as transformers. Its strong performance is attributed to the increased demand for power equipment from the booming power transmission and distribution market in North America and the expansion of infrastructure investment in the Middle East.

Furthermore, the company was able to quickly build up its performance in the U.S. as it has a factory in Alabama. The geographical proximity of the production facility allowed the company to quickly respond to the growing demand in the U.S. and stably produce power equipment when the supply chain was reorganized amid the U.S.-China conflict and the Russia-Ukraine war.