HD Hyundai Electric has the highest operating margin among South Korea's three major power equipment companies: HD Hyundai Electric, Hyosung Heavy Industries and LS ELECTRIC.
In its third-quarter earnings announcement, HD Hyundai Electric presented a strategy focused on high-value businesses. It intends to further improve profitability by focusing on markets such as data centers.
The data center market is already delivering tangible results. The company signed a contract worth 1.1212 trillion won to supply data center power infrastructure to one major technology company, and supply contracts with three other major technology companies were expected in the fourth quarter.
In response, Kim Young-ki, president and CEO of HD Hyundai Electric, is expanding production capacity in Cheongju, North Chungcheong Province, and Ulsan. The company expects the two expansions to add more than 450 billion won in annual revenue once completed.
According to information compiled on October 28 from the Financial Supervisory Service's electronic disclosure system, DART, and the securities industry, HD Hyundai Electric outlined the current state of demand for data center power equipment and its outlook when announcing preliminary consolidated third-quarter results on October 27.
HD Hyundai Electric's third-quarter revenue was 1.1799 trillion won and operating profit was 284.5 billion won, up 18.5% and 15.1%, respectively, from the same period a year earlier. Compared with the previous quarter, revenue rose 3.3% and operating profit fell 0.9%.
The operating margin was 24.1%, down 0.7 percentage points year on year and 1.0 percentage point from the previous quarter. HD Hyundai Electric attributed the decline to an increased share of domestic revenue, which carries relatively lower margins than North American revenue.
Nevertheless, its operating margin remains the highest among the three power equipment companies.
LS ELECTRIC's third-quarter operating margin was 12.4%. Hyosung Heavy Industries, which had not yet announced third-quarter results, recorded a second-quarter operating margin of 15.7%.
According to the power equipment industry, Kim attributed the high operating margin to competitiveness in quality, delivery and service, as well as selective acceptance of high-profit orders enabled by its early position in the US market.
Against this backdrop, HD Hyundai Electric presented a strategy focused on high-value businesses in its third-quarter earnings announcement and said it would concentrate on high-profit markets such as data centers and semiconductors.
It also provided regional market outlooks reflecting expanding data center power demand, information on supply contracts with major technology companies and an outlook for generator orders.
HD Hyundai Electric expected 10 major US utilities to invest $289 billion, approximately 382.7227 trillion won, in transmission and distribution over the next five years to meet AI data center demand. It therefore forecast medium- to long-term growth in North American power infrastructure demand.
The company said actual purchase orders had begun under a distribution transformer supply contract with a major North American technology company. In July, HD Hyundai Electric had disclosed an agreement to supply 1.1212 trillion won worth of data center distribution and power equipment to a major technology company.
It also said discussions on new supply contracts with several major technology companies were progressing smoothly and expected contracts from the fourth quarter onward. In an October 28 report on HD Hyundai Electric, Yuanta Securities analyst Son Hyun-jung expected new long-term supply contracts with three major technology companies to be finalized at the end of November.
HD Hyundai Electric also expected favorable conditions in Europe's power equipment market to continue as major technology companies stepped up their expansion there and demand for large data centers grew.
The company said order discussions had intensified for generators to be coupled with HD Hyundai Heavy Industries' engines for AI data centers, and it expected orders between the fourth quarter of 2026 and the first quarter of 2027. It also expected generator order volumes to increase as HD Hyundai Heavy Industries expanded engine production capacity.
HD Hyundai has recently been pursuing a group-wide expansion of its engine business as engines are being considered as a power source for data centers. Under this arrangement, HD Hyundai Heavy Industries would manufacture engines, HD Hyundai Electric would supply generators to be coupled with them, and HD Hyundai Marine Solution would handle maintenance.
HD Hyundai Electric has also decided to expand capacity in response to growing data center demand.
HD Hyundai Electric will invest 198 billion won in its distribution campus in Cheongju, North Chungcheong Province, to build factories and automation facilities for switchgear and distribution transformers. The investment period runs from November 2026 to June 2029.
The company expected the completed facilities to increase annual revenue by 250 billion won.
In Ulsan, a new power transformer factory built with an investment of 211.8 billion won will begin operating in November. HD Hyundai Electric set a target of reaching 100% utilization in November 2027 after a stabilization period. It estimated that full-scale operation would add more than 200 billion won in annual revenue.
In an October 28 report on HD Hyundai Electric, LS Securities analyst Sung Jong-hwa said, “Although its capacity expansion is the least extensive among the three power equipment companies, it is significant that HD Hyundai Electric, which had been the most restrained in expanding capacity, has announced a new expansion for the first time in a while.” Sung forecast that data centers' share of new orders in the power business would rise from 1.8% in 2025 to 16% in 2027.
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Original Korean article: huffingtonpost.kr
English brief by Korea Wind Intelligence, koreawindintel.com
