Third-quarter revenue hits record high, order backlog reaches $8.8 billion... Revenue from power distribution and new businesses jumps 85.8%
Additional 198.8 billion-won investment in Cheongju, new Ulsan transformer plant to commence operations in November
HD Hyundai Electric (267260) has decided to expand its production facilities with an investment of 198.8 billion won, despite a decline in new orders during the third quarter. The move comes as an accumulation of large-scale contracts secured in the first half of the year increased its order backlog, while production schedules for North American power equipment supplies have filled up significantly, necessitating an expansion in manufacturing capacity.
The company's earnings growth, traditionally driven by ultra-high-voltage transformers, is now being bolstered by power distribution equipment and new businesses. HD Hyundai Electric plans to meet soaring demand for North American power infrastructure by scaling up production capacity through its Cheongju Distribution Campus and the new Ulsan transformer plant.
Decline in New Orders Offset by Growing Workload... Sharp Surge in Distribution and New Business Revenue
HD Hyundai Electric announced on the 27th that its third-quarter consolidated revenue rose 18.5% year-on-year to 1.1799 trillion won, marking a record high for a single quarter. Operating profit increased by 15.1% to 284.5 billion won, yielding an operating margin of 24.1%. Operating profit missed market expectations by approximately 7%.
The revenue growth was propelled by power distribution equipment and new businesses. Revenue from these segments surged 85.8% year-on-year to 325.1 billion won, compared to 175.0 billion won in the same period last year. The growth was driven by increased sales of power distribution equipment in North America and distribution transformers for the domestic semiconductor industry, alongside the reflection of 125.0 billion won in revenue from the Sinan Anjwado Battery Energy Storage System (BESS) project secured last year.
Revenue from the company's traditional mainstay, the power equipment segment, fell 7.7% to 542.3 billion won. While delayed shipments of transformers to Europe and the impact of a strong South Korean won weighed on the segment, the distribution equipment and BESS businesses drove overall top-line growth.
New orders in the third quarter totaled $980 million, down 19.1% from the same period last year. This reflected a base effect following the massive $3.231 billion in contracts secured in the first half alone.
Conversely, the order backlog at the end of September stood at $8.843 billion, up 4.2% from the previous quarter. North America accounts for 68% of this backlog. Deliveries and order fulfillments under long-term supply contracts for distribution transformers previously signed with North American big tech companies also commenced in the third quarter.
During its earnings conference call, the company projected that annual revenue from distribution transformers, which historically ranged between 100 billion and 120 billion won, will expand to as much as 300 billion won next year. Management noted that production schedules are already filled to capacity, with a substantial volume unable to accept additional orders.
Cheongju to Focus on Distribution Equipment, Ulsan on Transformers... Expanding Production Capabilities
HD Hyundai Electric will invest an additional 198.8 billion won in its Cheongju Distribution Campus over the next 26 months. The company plans to establish a power distribution equipment production cluster outfitted with smart factories and logistics automation systems. The investment is expected to generate an annual revenue increase of 250 billion won.
The Cheongju Distribution Campus began operations in November last year. Phase 1 investments increased the annual production capacity of medium- and low-voltage circuit breakers from 5 million to 8.5 million units, while the upcoming Phase 2 investment will broaden the range of supplied power distribution equipment.
In North America, driven by large-scale power infrastructure projects such as AI data centers, there is a growing trend of clients ordering power transformers, distribution transformers, circuit breakers, and switchgear as a bundled package. HD Hyundai Electric has been expanding its product supply range by securing long-term supply contracts related to North American data centers.
The new Ulsan power transformer plant is scheduled to begin full-scale operations in November. It will add an annual production capacity of 40 to 50 units, with the company anticipating an annual revenue increase of over 200 billion won. The facility will primarily manufacture high-value-added products, including transformers for AI data centers and 765kV ultra-high-voltage transformers.
By scaling up distribution equipment production in Cheongju and ultra-high-voltage transformers in Ulsan, HD Hyundai Electric aims to leverage its order backlog exceeding $8.8 billion and expand the manufacturing capacities of both plants to effectively respond to delivery demands from North American clients.
