Daishin Securities recently raised its price target for Hyosung Heavy Industries to a notable KRW 4 million, reflecting a fundamental shift in how the market values power grid equipment manufacturers.
This re-evaluation is rooted in a powerful global trend: a massive, unfolding electricity shortage. First, the AI revolution is creating an unprecedented hunger for energy, with data centers consuming vast amounts of power. Second, existing power grids in developed countries like the U.S. are aging and require urgent modernization and expansion. This dual pressure has created historic demand for essential grid components, especially high-voltage transformers.
The industry, however, is struggling to keep up. The time it takes to receive a new large power transformer, known as the lead time, has ballooned from a typical 12-18 months to an astonishing 3 to 5 years. This isn't a temporary hiccup; it's a structural bottleneck confirmed by numerous sources, including the U.S. Department of Energy and reports from Bloomberg. This supply crunch is further solidified by policy, such as the U.S. FERC Order 1920, which mandates long-term transmission planning and ensures a steady pipeline of large-scale projects.
This extended lead time has fundamentally changed the business model. Customers, desperate to secure equipment for their multi-year projects, are now booking production capacity years in advance. This 'slot reservation' system, similar to how airlines buy airplanes, gives companies like Hyosung incredible visibility into future revenues and strengthens their pricing power. Competitors like GE Vernova have also confirmed this trend, highlighting massive backlogs and slot-based sales.
Hyosung Heavy Industries is perfectly positioned to capitalize on this dynamic. The company currently holds a massive order backlog of over KRW 15 trillion, enough to keep its factories busy for nearly four years. Furthermore, it is strategically expanding its production capacity in Memphis, USA, to directly serve the high-demand, high-profit North American market.
Because of this, analysts are changing how they value the company. Instead of focusing on next quarter's results, they are looking at the long-term, locked-in value of its multi-year backlog. The price target of KRW 4 million is based not on 2026 earnings, but on the company's projected value as far out as 2029, reflecting a new era of sustained growth for the power grid industry.
- High-Voltage Transformer: A key component in an electrical grid used to increase or decrease voltage levels for efficient long-distance power transmission and local distribution.
- Lead Time: The total time elapsed from the moment a customer places an order for a product to the moment it is delivered.
- Order Backlog: The total value of confirmed customer orders that have not yet been fulfilled or delivered.