Korean power equipment stocks staged a sharp rebound after tumbling on a U.S. interest rate shock and profit-taking. With demand for ultra-high-voltage transformers and switchgear remaining solid amid the expansion of artificial intelligence (AI) data centers, and large-scale orders continuing to roll in, analysts say the industry's fundamentals remain intact.
According to the Korea Exchange on Tuesday, Hyosung Heavy Industries closed the previous session at 3.929 million won, up 10.09% from the prior trading day. The stock had declined every day from the 8th to the 20th of this month, with the exception of a single flat session on the 13th, before bouncing back. LS ELECTRIC also surged 13.84% to close at 271,500 won, while HD Hyundai Electric rose 6.57% to 1.136 million won. All three stocks turned higher for the first time in 10 trading sessions.
Power equipment stocks had been under pressure recently as a surge in long-term U.S. Treasury yields and rising international oil prices weighed on investor sentiment. The U.S. 30-year Treasury yield had climbed to its highest level since the global financial crisis, weighing on valuations across growth stocks. Overnight, the U.S. 30-year yield fell more than 6 basis points (1bp = 0.01 percentage point) from the previous session to 5.116%, while the 10-year yield dropped more than 9bp, allowing investor sentiment to recover quickly.
Nvidia's better-than-expected earnings and revenue guidance, which confirmed that AI investment demand remains robust, is also cited as a factor behind the rebound in power equipment stocks. Expectations have resurfaced for rising demand for transformers, switchgear and cables, all of which are essential to the rollout of AI data centers.
LS Group, in particular, recently surpassed 18 trillion won in order backlog for the first time ever, raising market expectations. LS's total order backlog as of the first quarter of this year stood at 18.2681 trillion won, up 21.9% from the end of last year. The increase was driven by core affiliates LS ELECTRIC and LS Cable & System winning a string of AI data center-related orders centered on North America and Southeast Asia.
LS ELECTRIC has secured an order backlog of 8.7423 trillion won by supplying switchgear and ultra-high-voltage transformers to U.S. Big Tech firms. "An expanded customer base ranging from global Big Tech to major Korean conglomerates is leading to capacity expansions at domestic and overseas plants," said Lee Min-jae, an analyst at NH Investment & Securities. "The company holds unrivaled medium- to long-term growth potential within the power equipment sector."
Hyosung Heavy Industries is also continuing to win large-scale orders, centered on the North American ultra-high-voltage transformer market. According to NH Investment & Securities, Hyosung Heavy Industries' first-quarter heavy industries order backlog stood at 15 trillion won, the largest among domestic and overseas competitors based on ultra-high-voltage transformers. With North America accounting for more than half of the backlog, the company is seen as having secured a stable earnings base for the coming years.
Securities analysts largely agree that the power equipment industry's fundamentals remain strong despite the recent correction. AI data center and power grid investment continues to expand, particularly in the United States and Europe, and ultra-high-voltage transformer prices continue to rise amid prolonged supply shortages. "Some North American projects have delivery dates scheduled for 2031 to 2032, indicating that supply shortages are becoming a long-term issue," Lee said.
