The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. — Ed.
Although Doosan Enerbility’s 4Q22 results proved somewhat lackluster due to one-off expenses, the company has set an achievable mid/long-term new order target. In particular, we believe that the firm’s potential in the domestic wind power market is being evidenced by its cooperation with overseas wind power players such as SGRE and Orsted. In 2023, the company is expected to begin expanding its presence in the wind power, gas, and hydrogen markets, as well as the nuclear power market.
Targeting new orders of at least W10tn by 2027
We maintain a Buy rating and a TP of W20,000 on Doosan Enerbility. We continue to offer the firm as our utility sector top pick in light of: 1) large-scale nuclear power plant expansion in the UK, UAE, and Saudi Arabia (in addition to existing expansion initiatives in Poland and the Czech Republic); and 2) SMR activity centering upon NuScale and X-Energy (W1tn pa); 3) increasing fuel conversion and gas turbine projects (over W1tn pa); and 4) wind turbine collaboration with Siemens-Gamesa (SGRE) (over W3tn pa).
During a recent conference call, Doosan Enerbility presented its new order targets for 2027: SMR W1.4tn, gas W1.8tn, and wind power W4.0tn. Doosan Enerbility plans to increase the scope of technological cooperation with SGRE to include offshore wind facility construction and maintenance & repair. Doosan Enerbility is aiming to produce 8MW and 10MW wind turbines in-house, but it will also manufacture SGRE’s 14MW wind turbine, so it can meet demand for wind turbines of diverse capacities upon domestic wind power market expansion in the future. As a result, profitable long-term maintenance contracts should contribute to mid/long-term order growth.
4Q22 review: Earnings somewhat disappoint on hefty labor costs
For 4Q22, Doosan Enerbility announced consolidated sales of W4.6tn (+114% y-y) and OP of W272.9bn (+115% y-y). On a non-consolidated basis, the firm saw sales of W2.1tn (+34% y-y) and OP of W19.1bn (-32% y-y), missing our estimates on labor costs of W50bn (including employee incentives). On the non-operating side, it recorded losses of W758.6bn, mostly due to stock investment valuation losses.
