Earnings jump 90%, but target price cut 18.5%—why Doosan Enerbility?

[Financial News] Shinhan Securities lowered its target price for Doosan Enerbility by 18.5%, from KRW 135,000 to KRW 110,000, despite improved third-quarter results and increased nuclear power and gas turbine orders. It lowered its valuation benchmarks to account for the high-interest-rate environment and the time lag before new orders translate into actual earnings. It maintained its Buy rating.
On the 30th, Han Seung-hun, a researcher at Shinhan Securities, explained the reason for the target-price cut, saying, “We increased the discount rate from 30% to 40% to reflect valuation pressures stemming from the recent high-interest-rate environment and the time lag before orders become visible.”
Doosan Enerbility reported consolidated third-quarter revenue of KRW 4.4495 trillion, up 14.7% from the same period a year earlier. Operating profit rose 90.6% to KRW 261.2 billion, 6.4% above the market forecast of KRW 245.5 billion.
Operating profit in the Enerbility segment rose 179.2% year over year to KRW 121.1 billion. The increase came as progress on gas-fired power projects in the Middle East and the Dukovany nuclear power project in the Czech Republic expanded the share of revenue from higher-margin businesses. New orders also rose 76.2% to KRW 2.8766 trillion.
Concerns about the Czech nuclear power project are considered excessive. Although construction talks recently collapsed, they were separate from the existing main equipment supply contract worth KRW 5.6 trillion.
The researcher said, “The collapse of construction talks in the Czech Republic and the KRW 5.6 trillion main equipment supply contract are separate matters,” adding, “Given its capabilities in manufacturing and installing main equipment and its local experience, the company is highly likely to join a new construction consortium.”
Additional order opportunities are also taking shape in the United States and Europe. Key examples include financing support from the U.S. Department of Energy for long-lead equipment for AP1000 nuclear power plants and Poland’s first nuclear power plant entering the procurement process. Doosan Enerbility is also in talks with Westinghouse about expanding the range of items it supplies.
The researcher said, “We expect the size of orders per nuclear reactor to grow alongside future procurement volumes.” In small modular reactors (SMRs), follow-on orders are expected for four modules in X-energy’s initial project. The researcher also said that reservations and negotiations for gas turbine deliveries are underway for volumes through 2031.
However, Shinhan Securities revised its assumptions for the pace of profitability improvements in the Enerbility segment and the earnings outlook for subsidiaries, lowering its estimate for consolidated operating profit by 6.6% for this year and 8.6% for next year.
The researcher said, “The medium- to long-term growth outlook driven by more concrete orders for nuclear equipment and increased gas turbine orders remains intact.” Compared with the closing price of KRW 56,700 on the 29th, the target price implies 94.0% upside.

[email protected] Bae Han-geul Reporter