Sanil Electric stock: SK Securities cuts target on shipment risks

SK Securities expects Sanil Electric's third-quarter earnings to fall slightly short of market expectations because of currency effects and typhoon-related shipping delays, while order intake remains strong. In its October 23 analysis, the brokerage cut its target price from KRW 320,000 to KRW 280,000 but maintained its Buy rating. Edaily published the analysis.

Temporary Earnings Headwinds

SK Securities estimates third-quarter revenue of KRW 168.7 billion, up 27.1 percent year over year, and operating profit of KRW 62.0 billion, up 45.3 percent. The estimates are below consensus revenue of KRW 175.3 billion and operating profit of KRW 65.8 billion.

The brokerage attributes the expected shortfall to a weaker won-dollar exchange rate and shipment delays caused by typhoons. It expects delayed shipments to be recognized as fourth-quarter revenue. Sanil Electric's export share reached 97 percent in the first half, while its currency-hedging ratio stood at about 50 percent, according to the analysis.

Orders And Capacity In Focus

SK Securities expects renewable-energy orders to rise from the previous quarter and reach a quarterly record. It points to supply-chain changes in the United States and Europe, where restrictions on Chinese-made inverters could support customers such as TMEIC and GE Vernova.

Sanil Electric won a KRW 51.2 billion solar-inverter reactor order from TMEIC USA in August and a KRW 35.1 billion BESS transformer order for U.S. data centers in October. The company also reported additional Bloom Energy orders in the third quarter, while discussions with prospective customers continue, according to Edaily.

Growth Papa places Sanil Electric in the specialized distribution-transformer segment serving energy-storage systems and data centers. It identifies HD Hyundai Electric, Hyosung Heavy Industries and LS ELECTRIC as peers in extra-high-voltage transmission transformers, leaving Sanil with a more specialized product focus.

What Sanil Electric Makes

Sanil Electric manufactures transformers, reactors and soft starters for power transmission and distribution, renewable energy, marine and offshore projects, railways, petrochemical facilities and data centers. Its products include oil-immersed, molded and dry-type transformers, as well as reactors, and the company supplies customers in Korea, the United States, Europe and other overseas markets. The company is based in Ansan, South Korea. Its specialized transformer position differs from the broader extra-high-voltage focus of HD Hyundai Electric, Hyosung Heavy Industries and LS ELECTRIC.

South Korean power-equipment shares remain sensitive to changing expectations for data-center investment and transformer demand; follow the KOSPI market environment.

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