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Profitability recovery will take time

2Q25 Review: Revenue beat, but profitability still under pressure

For 2Q25, Doosan Fuel Cell reported revenue of W128.5bn (+48.5% YoY, +28.8% QoQ), exceeding market expectations thanks to a sharp increase in main equipment deliveries. Revenue from main equipment came in at W102.3bn (RPS: W53.9bn, CHPS: W48.4bn), up 90% YoY from W53.9bn in 2Q24. Meanwhile, service revenue totaled W26.2bn, down slightly YoY from W32.7bn.

The company posted an operating loss of W1.4bn for the quarter, down from a profit of W2.9bn a year earlier but narrower than the W11bn loss in 1Q25. Gross margin improved to 6.9% (vs. 0.1% in 1Q25) as high-cost inventory was largely cleared in the previous quarter. However, margin remained lower than the 13.5% recorded in 2Q24.

Top-line growth encouraging, but path to profitability remains unclear

Doosan Fuel Cell expects to generate nearly W300bn in main equipment revenue in 2H25, with CHPS-related orders starting to be recognized. The company is also exploring overseas expansion via affiliate HyAxiom, particularly in the US, China, and Taiwan.

Still, an operating profit turnaround will likely take time. First, high-cost inventory remains on the books. Second, overall main equipment margins have yet to reach comfortable levels. And third, profitability for the new SOFC product is still in the early stabilization phase.

After reabsorbing some of the intellectual property (IP) previously held by HyAxiom, the company has secured independent R&D and licensing capabilities and expanded its business territory to Asia and Oceania. Going forward, competitiveness in new markets such as data centers will be key.

Raise TP to W22,000; maintain Hold

We raise our target price on Doosan Fuel Cell to W22,000 (from W14,000) but maintain our Hold rating. The higher TP reflects an 8.9% upward revision to our 2025 revenue forecast and recent share price gains for peer Bloom Energy. Our TP is based on an EV/sales multiple of 4x (previously 3x). Further upside is possible if the company can swiftly demonstrate profitability in its SOFC business and secure orders from the fast-growing AI data center segment.