Hyosung Heavy Industries Stock Soars Eightfold on Power Equipment Demand

Hyosung Heavy Industries' stock has become South Korea's most expensive, with a single share exceeding 4 million won, an eightfold increase from its price a year ago. This surge has led to calls for a stock split, similar to Samsung Electronics' move in 2018 which made its shares more accessible and boosted trading volume.

The company's impressive growth is largely attributed to its power equipment business, which includes transformers and circuit breakers. This division accounts for 70% of Hyosung Heavy Industries' revenue and a remarkable 99% of its operating profit. The booming demand for AI data centers, requiring significant power infrastructure, has propelled not only semiconductor companies like Samsung Electronics and SK Hynix but also power equipment manufacturers like Hyosung Heavy Industries.

“

The company's stock price has risen more than eightfold in just one year, making it a rather heavy stock now.

The need for expanded and upgraded power infrastructure is driven by the rapid advancement of information technology. Hyosung Heavy Industries' order backlog for power equipment reached 10.7 trillion won by the end of 2024, projected to increase by 43% to 15.3 trillion won by the end of 2025. This backlog represents over three years of annual sales, which stood at 4.1 trillion won.

“

The investment scale of big tech companies in AI data centers is increasing, leading to significant growth not only for memory semiconductor companies like Samsung Electronics and SK Hynix but also for power equipment companies like Hyosung Heavy Industries.

The company is a leading producer of ultra-high voltage transformers, including the 765-kilovolt (kV) transformer it developed domestically. It holds the top market share in the United States, its largest transformer market, with a production facility there. Competitors like HD Hyundai Electric and global players such as Hitachi Energy, Mitsubishi, Siemens Energy, and GE Vernova are also active in this sector.

While Hyosung Heavy Industries, HD Hyundai Electric, and LS Electric have comparable annual sales in power equipment, their market capitalizations are all around 40 trillion won. Their price-to-earnings ratios (PER) are exceptionally high, exceeding 50, compared to semiconductor giants like Samsung Electronics and SK Hynix, which have PERs around 6. This high valuation is supported by the projected sustained growth in the power equipment sector, expected to continue for at least two decades, fueled by the global energy transition, electrification of various sectors, and infrastructure upgrades in developed and emerging economies.

“

The global power demand is expected to continue to increase until 2050.