Korean Power Equipment 2Q26 Preview: LS Electric orders may beat expectations, while Hyosung Heavy earnings may fall below consensus

Overview

This report is JPMorgan's preview and model update for the 2Q26 results of Korean power equipment companies. It covers HD Hyundai Electric, Hyosung Heavy Industries, and LS Electric. The core view is that industry demand remains supported by US power grids, large power transformers, and AI data center capital expenditure, but near-term performance will diverge among companies: LS Electric has the strongest order momentum, Hyosung Heavy may fall below expectations due to the Middle East conflict and a high base, while HD Hyundai Electric should be broadly in line with consensus.

Core views

Key views include: first, LS Electric is benefiting from US data center orders, with 2Q new orders expected to exceed KRW 2tn and potentially drive an upward revision to FY26 new order guidance; second, although Hyosung Heavy benefits from global high-voltage transformer demand over the long term, 2Q earnings may fall below consensus, and investors should monitor delays in 765kV projects and progress with the Quanta Services joint venture; third, HD Hyundai Electric has secured more than US$700mn in hyperscaler orders, marking its entry into the AIDC market and supporting a higher price target; fourth, all three companies benefit from higher US power equipment sales assumptions, but LS Electric's current share price is relatively high versus its price target, so the Neutral rating is maintained.

Analysis framework

The report combines an earnings preview, order momentum tracking, assessment of the probability of guidance revisions, and segment-based SOTP valuation. JPMorgan forecasts 2Q26 operating profit, order performance, progress on US AIDC projects, and the impact of regional exposure for each company, while updating 2026-2028 earnings estimates and Jun-27 price targets.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The price targets for HD Hyundai Electric, Hyosung Heavy Industries, and LS Electric are all based on SOTP valuation, with different forward P/E multiples applied to different business segments.

• Earnings forecastsEarnings Revision

  Earnings forecast upgrade

  The report raises 2026-2028 earnings forecasts for the relevant companies based on US power equipment sales assumptions, AIDC orders, and changes in order guidance.

• Event-drivenEarnings Preview

  Earnings preview

  Ahead of 2Q26 results, key areas of focus include operating profit versus consensus, new orders, management guidance, tariff refunds, and the impact of regional conflicts.

Asset mapping & comparison

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

• HD Hyundai Electric (267260.KS)

  Korean power equipment coverage company, rated Overweight, with a price target of W1,375,000.

  Strengths

  Strong manufacturing capabilities in large power transformers, an established US utility customer base, more than US$700mn in hyperscaler AIDC orders, and order backlog that provides revenue visibility.

  Weaknesses

  The North American business valuation multiple was reduced from 40x to 35x, reflecting the possibility that future growth CAGR may moderate slightly from a high base.

  Comparison

  Compared with LS Electric, HD Hyundai Electric has greater exposure to large power transformers and US utility/grid demand; compared with Hyosung Heavy, its 2Q earnings expectations are closer to consensus.

  Risks

  US LPT demand below expectations, slower-than-expected expansion in Europe and the Middle East, rising copper prices and raw material costs, US tariffs, and slowing demand for rotating and distribution equipment.

• Hyosung Heavy Industries (298040.KS)

  Korean power equipment coverage company, rated Overweight, with a price target of W4,100,000.

  Strengths

  A large power transformer manufacturer in the US and Korea, benefiting from global growth in high-voltage transformer demand, capacity expansion, European revenue growth, and the joint venture established with Quanta Services.

  Weaknesses

  2Q operating profit is expected to be approximately 6% below consensus, while the high order base in 1Q may cause QoQ order momentum to slow; exposure to the Middle East conflict is also a concern.

  Comparison

  Compared with HD Hyundai Electric, Hyosung Heavy has greater near-term earnings uncertainty; compared with LS Electric, it has greater long-term exposure to large transformer demand, but its AIDC order strategy requires further details.

  Risks

  US and global LPT demand below expectations, higher copper prices and freight costs, off-balance-sheet risks caused by project construction delays, and delays in advancing 765kV projects.

• LS Electric (010120.KS)

  Korean power equipment coverage company, rated Neutral, with a price target of W200,000.

  Strengths

  Korea's largest distribution equipment manufacturer, with more than 60% market share, strong US data center orders, expected 2Q new orders above KRW 2tn, and potential upward revisions to FY26 order guidance.

  Weaknesses

  Lower exposure to large power transformers than peers; valuation is high following strong year-to-date share price performance, and the current share price is above the price target.

  Comparison

  Compared with HD Hyundai Electric and Hyosung Heavy, LS Electric is more prominent in distribution equipment and data center orders, but the report believes its share price may perform broadly in line with the broader market over the next 6-12 months.

  Risks

  Slower-than-expected gains in LPT market share in the US and other markets, AIDC orders below expectations, slowing demand for renewable energy, automation, and distribution grids in Korea, higher raw material and freight costs, and US tariffs.

Key data

• LS Electric 2Q26E operating profitKRW 167bnUp 54% YoY and 32% QoQ, more than 5% above consensus.
• LS Electric 2Q new orders>KRW 2tnSignificantly above approximately KRW 1tn in 1Q, mainly driven by momentum in US data center orders.
• Potential upward revision to LS Electric FY26 new order guidanceKRW 5tn to KRW 5-6tnPreviously raised from KRW 4tn to KRW 5tn; the report believes there is still potential for a further upgrade.
• Hyosung Heavy 2Q26E operating profitKRW 266bnUp 62% YoY and 74% QoQ, but approximately 6% below consensus.
• HD Hyundai Electric 2Q26E operating profitKRW 301bnExpected to be broadly in line with consensus.
• HD Hyundai Electric AIDC orders>US$700mnNew orders from hyperscalers, viewed by the report as a breakthrough in entering the AIDC market.
• HD Hyundai Electric price targetW1,375,000Raised from W1,315,000; Overweight rating maintained.
• Hyosung Heavy Industries price targetW4,100,000Raised from W3,900,000; Overweight rating maintained.
• LS Electric price targetW200,000Raised from W190,000, but Neutral maintained due to its relatively high valuation.

Impact & implications

For investment implications, the Korean power equipment sector remains in a structural upcycle driven by US grid investment, shortages of large power transformers, AIDC orders, and AI capital expenditure. HD Hyundai Electric and Hyosung Heavy are more exposed to large transformers and US/global high-voltage equipment demand, while LS Electric is more driven by upside surprises in orders and breakthroughs with data center customers. However, near-term share price performance will depend on 2Q order disclosures, the extent of full-year guidance upgrades, tariffs and raw material costs, and the impact of the Middle East conflict on regional revenue and profit.

Risks

• US demand for large power transformers and power grids falls below expectations.
• AIDC and data center orders are implemented more slowly than expected.
• The Middle East conflict affects regional orders and profit recognition.
• Delays in advancing 765kV projects, particularly projects in Texas and other parts of the US.
• Rising copper prices, raw material costs, and freight expenses compress margins.
• Uncertainty surrounding US tariffs and progress on tariff refunds.
• LS Electric's high valuation limits upside to the price target.

What to watch

• The difference between actual 2Q26 operating profit and consensus.
• Whether LS Electric further raises FY26 new order guidance from KRW 5tn to KRW 5-6tn.
• Revisions by the three companies to full-year operating profit or order targets.
• New order disclosures by HD Hyundai Electric and Hyosung Heavy for US AIDC projects.
• The specific strategy and order contribution of the Hyosung Heavy-Quanta Services joint venture.
• Progress on 765kV projects and the impact of delays.
• Tariff refunds, margin expansion, and plans to expand US-based production capacity.
• The boost to domestic power equipment demand from large-scale AI expansion projects in Korea.