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On Monday, UBS analysts initiated coverage on Hyosung Heavy Industries Corp (298040:KS), a South Korean industrial conglomerate, with a Buy rating and a price target of KRW530,000.00. The UBS analysts expressed optimism about the company’s potential for profitability improvements in 2025, driven by an increased contribution from power transformer sales.
Despite acknowledging that Hyosung Heavy’s electrical equipment division currently operates with a margin that lags behind peers like Hyundai (OTC:HYMTF) Electric, UBS analysts foresee a narrowing of this gap. They project strong profit growth for Hyosung Heavy, fueled by both sales growth and margin enhancements.
The UBS analysts also noted some risks associated with Hyosung Heavy’s construction division, including its subsidiaries. They highlighted that contingent liabilities from potentially problematic project financing (PF) loans could impact the company’s equity value by approximately 4%. However, the analysts maintain that the electrical equipment business is the primary factor influencing the company’s share price.
Despite these risks, UBS analysts believe that Hyosung Heavy’s stock is poised to recover from its recent downturn. They anticipate that the company’s orders and earnings will continue to exceed expectations, which would contribute to a rebound in its share price. The analysts’ commentary suggests confidence in the company’s ability to overcome challenges in its construction division and capitalize on the strength of its electrical equipment business.
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