HD Hyundai Electric: Broadening from grid to data centers

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HD Hyundai Electric: Broadening from grid to data centers

HD Hyundai Electric UBS Research

UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: Will the high voltage power transformer market remain tight ?

We believe so, particularly with ultra high voltage power transformers. We believe the demand is

strongly supported by electricity usage growth corresponding grid investment, while supply response

is only modest and slow to ramp up.

Q: Can medium/low voltage electrical equipment sales growth accelerate?

We are warming up for potential growth acceleration, as Korean companies may increase capex

spending amid semiconductor upcycle and fiscal stimulus. HD Hyundai Electric is gradually expanding

presence among US data center customers, too.

Q: Will management commit to expand US power transformer capacity amid tight supply?

Possibly, as lead time for power transformer orders continues to lengthen. But decision to expand

may not be imminent as management appears focus on successfully ramping up phase 1 expansion

in the US.

UBS VIEW We like HD Hyundai Electric for its leading position in high voltage power transformers where we

expect supply to remain tight in the next few years. The company is also close to being a pure play in

the electrical equipment sector. This enables the company to generate industry-leading profitability

and receive a valuation premium against other stocks with mixed business portfolios. In the near

term, constrained production capacity for power transformers is a limiting factor for backlog growth.

EVIDENCE Electricity demand is accelerating globally, led by electrification in various industries and investment in

AI.