LS ELECTRIC (010120) has successfully translated power equipment orders into robust revenue, significantly boosting its profitability. In its third-quarter earnings release, the company attributed the margin improvement to rising sales from high-margin projects and products in both the domestic and U.S. markets. Although new orders in the third quarter declined compared to the previous quarter, recent long-term supply contracts signed with U.S. Big Tech companies are underpinning delivery volumes for next year.
According to LS ELECTRIC on the 22nd, its preliminary consolidated financial results for the third quarter showed revenue of 1.8778 trillion won and an operating profit of 233.5 billion won. These figures represent year-over-year increases of 54.4% and 131.7%, respectively. Compared to the preceding quarter, revenue rose 19.1% and operating profit grew 30.8%, both reaching all-time quarterly highs. The operating margin climbed 4.5 percentage points from 8.3% in the third quarter of last year to 12.4% this year.
By product segment, growth in switchgear and ultra-high-voltage transformers was particularly pronounced. Third-quarter sales for switchgear surged 120% year-over-year, while ultra-high-voltage transformer sales jumped 106%. North American revenue reached approximately 500 billion won, up about 25% from the previous quarter.
Korea Investment & Securities evaluated that expanding sales of power equipment to the U.S. has enhanced the core earnings power of the primary business. The brokerage noted that while the third quarter reflected a U.S. tariff refund gain along with restructuring costs for a Chinese subsidiary, the offsetting positive and negative impacts resulted in a minimal net effect.
Order trends vary depending on the benchmark comparison period. New orders in the third quarter totaled 1.5928 trillion won, up 132.9% from the same period last year, but down 23.6% compared to 2.0835 trillion won in the previous quarter. Order backlog at the end of the quarter stood at 7.043 trillion won, maintaining a similar level with a 0.6% increase from the prior quarter.
Contracts announced after the third quarter are providing clearer visibility into next year's delivery schedules. On the 19th, LS ELECTRIC announced a contract worth approximately 168.9 billion won to supply data center power distribution solutions to a U.S. Big Tech firm. The supplies include 38-kilovolt (kV) high-voltage switchgear, which distributes incoming power to data centers and protects equipment during power anomalies.
This long-term supply contract spans deliveries for 2027 and 2028. Among them, the fixed-price volume for 2027 amounts to 168.9 billion won, while the 2028 volume remains subject to follow-up negotiations. The company is also in discussions with this client for additional supplies of low-voltage switchgear and distribution-class transformers, alongside the high-voltage switchgear.
Deliveries under the Bloom Energy contract are also slated for next year. On the 13th, LS ELECTRIC announced a switchgear and power transformer supply contract worth approximately 185.3 billion won with Bloom Energy. The equipment will be utilized in a fuel-cell-based on-site power generation project for a Big Tech data center in Pennsylvania, USA, with delivery scheduled between April and July next year. The agreement is a package contract supplying switchgear and transformers connected to on-site power generation facilities.
The company is also strengthening its local infrastructure to ensure booked orders are delivered on schedule. LS ELECTRIC is scaling up investments and building integrated design, production, and service systems centered around its production hubs in Utah and Bastrop, Texas. Hana Securities forecasted that capacity expansions aimed at maintaining rapid delivery times could lead to additional revenue growth.
The key to future earnings growth will be whether the company can successfully deliver its secured orders on schedule while maintaining its elevated profitability.
