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Decent 3Q24 results

3Q24 review: Below-consensus revenue, in-line OP

HD Hyundai Electric reported decent 3Q24 results, with revenue of W789bn (+14% YoY; 5% below consensus), operating profit of W164bn (+92% YoY; in line with consensus), and OP margin of 20.8%. While seasonal factors and weakness in US-bound distribution equipment had a negative impact, core products (power equipment) and the key North American market remained solid overall. Meanwhile, other than a W3.1bn reversal of raw materials-related provisioning, there were no one-off items in the quarter.

ASP remains elevated; further spec upgrades to push ASP higher

As of end-3Q24, HD Hyundai Electric’s order backlog stands at W5.3tr (+36% YoY). The prolonged shortage of ultra-high-voltage transformers has led the firm to adopt a selective order-taking approach in 2H24. While a tough comparison and capacity constraints may limit growth in order volume, we see further upside to ASP due to growing customer demand for more advanced specifications. Over the long term, we expect elevated product prices to extend to regions other than North America (e.g., Europe).

We also note continued demand growth for high-voltage circuit breakers―a trend that was particularly evident in the Middle East in 3Q24. Like high-voltage transformers, circuit breakers are high-margin products that are in short supply relative to demand; as such, we see a high likelihood that prices will be raised. All in all, the company looks favorably positioned to secure short lead-time orders for products with relatively high available capacity, such as circuit breakers and distribution transformers.

Maintain Buy and TP of W490,000

We maintain our Buy rating and target price of W490,000 on HD Hyundai Electric. Market conditions remain favorable, as evidenced by: 1) recent massive investments in US power infrastructure; and 2) increased power supply contracts between utilities and major data center operators such as Google. In 2025, we expect earnings to expand further on the fulfillment of high-ASP orders. Additionally, the effects of expanded capacity at domestic and US production lines (+20%; completed in September-October) should materialize from 2025, driving overall volume higher. The stock is trading at a 2025F P/E of 18x, a 44% discount to peers (32x). We believe the recent heightened share price volatility presents a strong buying opportunity.





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