JPMorgan believes the Asian power equipment up-cycle has not yet ended

Overview

This report focuses on Asian power equipment companies, especially Korean equipment companies, and their opportunities in U.S. transmission and distribution, AI data center, and utility grid investment themes. JPMorgan argues that recent market worries about equipment prices peaking, policy shifts, overcapacity expansion by Indian or Chinese players, delays in U.S. ultra-high-voltage transmission construction, and a potential cooling in AI data center capex have been overstated. Its core thesis is that demand for high-voltage transmission and distribution equipment continues to be supported by grid aging, long-distance renewable power transmission, industrial reshoring, electrification, data center growth, and reliability needs under extreme weather.

Core views

The report views the Asian power equipment up-cycle as likely to continue. A flattening in U.S. transformer PPI does not imply lower high-voltage transmission equipment prices because the indicator is lagging and includes equipment across different voltage levels; margin support comes from a higher U.S. sales mix and improved product mix toward ultra-high-voltage products. U.S. 765kV transmission approval delays mainly create order confirmation timing and execution risks, rather than demand disappearance. Even if behind-the-meter generation increases at data centers, high-voltage infrastructure remains necessary. While dependence on U.S. orders is a genuine risk for Korean companies, Hyosung, LS Electric, and Hyundai Electric are expanding order sources toward Australia, India, Europe, and U.S. data centers.

Analysis framework

The report uses a question-and-answer structure to respond to investor concerns one by one, and cross-validates via channel interviews, U.S. transformer PPI, Korean transformer export pricing, PJM electricity prices and transmission congestion, the 765kV project pipeline, AI capex forecasts, valuation comparisons, and company order announcements.

Methodology notes

• Industry supply and demand analysisHigh-voltage transmission equipment price and capacity constraint analysis

  Judges transmission and distribution equipment sentiment using pricing, capacity expansion execution pace, regulatory approvals, labor shortages, and supplier entry barriers.

  The report argues that although several peers have announced capacity expansions, approval timelines and labor constraints keep effective supply growth relatively slow, while Chinese and Indian suppliers face difficulties entering the regulated U.S. market.

• Demand-driven analysisGrid-congestion and data center demand framework

  Takes grid aging, extreme weather, renewable interconnection, industrial reshoring, electrification, and AI data center expansion as sources of transmission and distribution demand.

  The report notes that electricity price spikes and transmission congestion during a PJM heatwave highlight grid constraints, making high-voltage AC and HVDC construction still necessary investments to improve reliability and transport remote renewables.

• Valuation and order validationRelative valuation and order-exposure analysis for power equipment companies

  Compares P/E multiples, data center order exposure, and regional order diversification of Hyundai Electric, Hyosung Heavy, and LS Electric.

  The report believes HDE’s and Hyosung’s valuation discount versus LS Electric mainly reflects lower direct data center exposure, and that the gap could narrow if data center orders increase.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hyosung Heavy Industries (298040.KS)

  Core beneficiary candidate; listed as OW with a target price.

  Strengths

  Strong in ultra-high-voltage transformers and circuit breakers, benefiting from U.S. utility, grid, and data center demand; has order and market share footing in markets such as Australia and India.

  Weaknesses

  A relatively high new-order base could face short-term pressure from order delays and concentration in the U.S. market.

  Comparison

  Compared with LS Electric, it is valued at a discount because of lower direct data center order exposure; valuation perception may improve if data center wins increase.

  Risks

  U.S. transmission project approval delays, order-pace volatility, concentration in one country's orders, and intensifying capacity competition.

• HD Hyundai Electric (267260.KS)

  One of the Korean power equipment beneficiaries.

  Strengths

  Has a strong utility and grid order base, with large reportedly won U.S. data center orders recently, and growing revenue in Europe.

  Weaknesses

  Direct data center exposure is still considered by the market to be lower than LS Electric.

  Comparison

  Also around 25x 2027E P/E like Hyosung Heavy, and below LS Electric.

  Risks

  If data center orders do not materialize as expected, the valuation discount could persist.

• LS Electric (010120.KS)

  A Korean power equipment company with higher direct data center exposure.

  Strengths

  The report estimates 30-50% of this year’s new orders come from data centers, giving it a higher valuation.

  Weaknesses

  Valuation is already above 40x, and growth expectations are priced aggressively.

  Comparison

  Relative to HDE and Hyosung, LS Electric trades at a premium due to higher data center exposure.

  Risks

  High valuation makes it more sensitive to order weakness, AI capex volatility, and competitive shifts.

• U.S. high-voltage transmission and distribution equipment market

  An important demand source for Asian equipment suppliers.

  Strengths

  Supported by grid aging, renewable interconnection, industrial reshoring, data centers, and EV demand.

  Weaknesses

  Project approvals, permitting, and bidding processes can cause delays.

  Comparison

  High regulatory entry barriers mean Chinese and Indian players are unlikely to scale quickly in the market in the near term.

  Risks

  Policy changes, transmission project delays, capacity expansion materializing faster than expected, and continued weakness in pricing indicators.

Key data

• Ultra-high-voltage product operating marginabout 40% or aboveThe report believes high-voltage transmission and distribution equipment prices remain resilient.
• Ultra-high-voltage product operating margin advantage over other productshigher by 5-10 percentage pointsSupported by product mix improvement and higher U.S. sales mix.
• PJM spot electricity price during heatwaveabout US$300/MWhWell above the usual US$25-40/MWh, reflecting grid constraints.
• PJM first five months wholesale power cost year-over-year changeup 68% year-over-yearReuters data is used to illustrate grid stress and demand growth.
• 765kV transmission efficiencyabout 75% lower than 230kV on a $/MW basisUsed to show the economics of transporting large volumes of power on ultra-high-voltage lines.
• AI capex forecast2026E about US$600bn, 2030E about US$1.4tnThe report expects AI infrastructure investment to remain strong over the long term.
• Forecasted cumulative AI capex before 2030about US$5.5tnHigher than the prior estimate of about US$5.1tn and expected to drive 138GW of additional data center capacity.
• Hyundai Electric / Hyosung Heavy average valuationabout 25x 2027E P/EThe report says this is below LS Electric’s valuation above 40x.
• Hyosung Heavy Industries rating and target priceOW, target price KRW 4,100,000The table shows the rating and target price as of July 6, 2026.

Impact & implications

If the report’s thesis is correct, Asian, especially Korean, power equipment companies may still benefit from U.S. grid investment, AI data center electricity growth, and tightness in ultra-high-voltage equipment supply. Short-term performance may be affected by high base effects, order delays tied to Middle East tensions, and project approval pace, but the report sees these as buying opportunities for quality names rather than a cyclical reversal signal.

Risks

• Further delays in approvals and permits for U.S. ultra-high-voltage projects such as 765kV may postpone order confirmation further.
• 2Q26 results may not be very strong due to high base effects and some order delays.
• Korean equipment makers’ high dependence on U.S. orders could pressure earnings leverage if U.S. technology capex or utility investment slows.
• If overcapacity expansion by competitors in India and China materializes beyond expectations, supply-demand balance and pricing resilience could weaken.
• If AI data center capex comes in below expectations, related equipment orders and valuation premia may decline.
• Geopolitical conflict could affect order pacing in regions such as the Middle East.

What to watch

• Whether U.S. high-voltage transformer and switchgear prices remain resilient.
• Whether U.S. 765kV project approval, bidding, and buildout pace normalizes.
• Congestion, power prices, and reliability events in PJM and other grid regions.
• Order progress at Hyosung Heavy, Hyundai Electric, and LS Electric in data centers.
• Actual capex pull-through from Korean domestic AI and semiconductor investment plans into transmission spending.
• Actual order breakthroughs by Indian and Chinese suppliers in U.S. data center and regulated utility markets.
• Changes in order intake, margins, and regional mix in 2Q26 earnings.