It's Because of the Sharp Drop in the Exchange Rate: What Will Happen to Power Equipment Going Forward? | Yoo Jae-seon, Senior Research Fellow, Hana Securities Research Center

Summary

Hana Securities Senior Research Fellow Yoo Jae-seon discusses the Korean power equipment and transformer sector. He argues recent stock weakness is mostly from the sharp KRW/USD exchange rate drop and data-center/political sentiment rather than fundamentals. Order backlogs extend to around 2030, supply remains tight, and he favors HD Hyundai Electric, Hyosung Heavy Industries, and LS Electric.

• Korea's power equipment and wire exports remain strong, with backlogs filled into 2030 and three to four years of demand visibility.
• Recent power equipment stock weakness is attributed to KRW appreciation, data-center investment sentiment and US political event risk.
• Transformer margins are estimated at around 40% OP margin and Korean power equipment companies are largely in net cash positions.
• Korean companies are strongest in high-voltage and ultra-high-voltage transformer segments, while Western firms lead lower-voltage data-center equipment.
• China is not a competitive threat in core US utility and big tech power equipment due security concerns.
• Top picks are HD Hyundai Electric, Hyosung Heavy Industries and LS Electric; LS Electric is benefiting from big tech short-delivery high-margin orders.
• Korea's transmission law changes allow private build-transfer projects, potentially accelerating grid investment.