Hyosung Heavy Industries, HD Hyundai Electric, and LS Electric saw their stock prices fall approximately 40-44% from May highs, closing on the 24th at levels sharply below peak valuations. Analysts attribute the decline to fund rotation within AI-themed stocks following the launch of single-stock leveraged ETFs for Samsung Electronics and SK Hynix in May, rather than deteriorating industry fundamentals. Despite the selloff, securities firms maintain that the power equipment sector remains in a growth phase, with demand expanding from ultra-high-voltage transformers to distribution equipment driven by AI data center construction in the United States.
Power Equipment Stocks Record 40% Decline from May Peaks
According to Korea Exchange data, Hyosung Heavy Industries closed at 2.681 million won on the 24th, down 44.8% from its May high of 4.865 million won. HD Hyundai Electric fell 44.0% from its peak to 810,000 won, while LS Electric dropped 39.7% to 202,000 won. The stocks had been among the top beneficiaries of AI data center investment expansion, as rising AI-driven power consumption fueled demand for ultra-high-voltage transformers and transmission infrastructure. North American grid replacement projects further boosted orders for transformers and distribution equipment. However, market sentiment shifted in May when fund flows moved toward semiconductor large-caps following the ETF launches. Son Hyun-jung, a researcher at Yuanta Securities, stated in a report that "the recent correction is not an industry peak-out but rather the result of profit-taking pressure after the first-half surge combined with fund rotation within AI themes."
LS Electric Reports Record Q2 Orders and Raises Full-Year Guidance
LS Electric's Q2 revenue reached 1.577 trillion won, up 32.2% year-over-year, while operating profit rose 64.3% to 178.5 billion won, both exceeding market expectations. The company attributed the performance to surging sales of switchboards and medium-to-low-voltage transformers for AI data centers in the United States. New orders in Q2 totaled 2.0835 trillion won, a 243% year-over-year increase and a quarterly record. First-half orders alone achieved 80% of the company's initial full-year target of 4 trillion won. LS Electric raised its annual order guidance to 6 trillion to 6.5 trillion won. Securities firms have set target prices for LS Electric at 250,000 to 320,000 won.
Analysts Forecast Continued Growth in Distribution Equipment Demand
HD Hyundai Electric raised its annual order guidance from $4.2 billion (approximately 6.2 trillion won) to $5.2 billion (approximately 7.7 trillion won) earlier this month. The company maintains steady demand for its core ultra-high-voltage transformers in the United States while accelerating distribution market expansion. Analysts have set target prices for HD Hyundai Electric at 1.1 million to 1.53 million won ahead of its Q2 earnings release. Hyosung Heavy Industries is broadening its market base beyond ultra-high-voltage transformers into gas circuit breakers (GCB). The company recently established a joint venture with Quanta Services to produce 75.2kV to 800kV GCBs starting in October. Yuanta Securities expects Hyosung Heavy Industries to raise its new order guidance during its Q2 earnings announcement. Target prices for Hyosung Heavy Industries range from 4.4 million to 5.3 million won. Sung Jong-hwa, a researcher at LS Securities, noted that "the power equipment sector saw ultra-high-voltage transmission products enter a supercycle in 2021-2022, and from the second half of last year, medium-to-low-voltage distribution products also entered a full-scale boom phase due to hyperscalers' AI data center investment expansion." Kim Tae-hyung, a researcher at Mirae Asset Securities, stated that "transformers and distribution equipment operate in a supplier-advantaged market where average selling price (ASP) increases are relatively easy," adding that "as power demand grows centered on US data centers, demand for both transformers and distribution equipment is expanding together."
FAQ
Why did Korean power equipment stocks fall 40% from their May highs?
Analysts attribute the decline to fund rotation within AI-themed stocks following the launch of single-stock leveraged ETFs for Samsung Electronics and SK Hynix in May, combined with profit-taking after the first-half rally, rather than deteriorating industry fundamentals.
What were LS Electric's Q2 results and updated order guidance?
LS Electric reported Q2 revenue of 1.577 trillion won (up 32.2% year-over-year) and operating profit of 178.5 billion won (up 64.3% year-over-year). The company raised its full-year order guidance from 4 trillion won to 6 trillion to 6.5 trillion won after Q2 orders reached 2.0835 trillion won, a 243% year-over-year increase.
