LS Securities stated on June 10 that Hyundai Engineering's decision to issue 500 billion won in zero-interest convertible bonds (CB) reflects both confidence in its growth and financial efficiency. The firm adjusted its target price from 210,000 won to 200,000 won, while maintaining a 'buy' rating.
Kim Se-ryeon, an analyst at LS Securities, noted, "The issuance of convertible bonds with a 0% coupon rate and maturity interest rate sends a clear message about the company's growth potential while reducing financing costs to zero."
Hyundai Engineering announced the issuance of the 500 billion won private convertible bonds, which will mature on July 7, 2031. The conversion price is set at 150,607 won, with the conversion period running from July 7, 2027, to June 7, 2031. The number of shares available for conversion is approximately 3,319,898, representing about 2.98% of the total shares issued.
The funds raised will be used for operating expenses related to new energy projects, including offshore wind, solar power, small modular reactors (SMR), and large nuclear power plants. Hyundai Engineering plans to invest 250 billion won in each of the years 2026 and 2027.
Kim emphasized the significance of this funding decision, considering Hyundai Engineering's financial structure. He stated, "As of the first quarter, Hyundai Engineering's net borrowings are only around 300 billion won, with cash reserves of 3.8 trillion won and total borrowings of 4.1 trillion won. The debt ratio stands at 157.6%, well below the industry average of 200%, indicating a solid financial foundation."
LS Securities assessed that the recent stock price adjustments across the energy sector have enhanced Hyundai Engineering's valuation appeal. Kim pointed out, "Hyundai Engineering's forward price-to-book ratio (PBR) has dropped to around 1.5, while global nuclear EPC and plant EPC companies have a PBR of at least 2. This indicates an attractive valuation opportunity."
He added, "Considering the potential for growth in the nuclear sector due to the Holtec SMR 300MW project in the U.S., expectations for nuclear project contracts in Bulgaria, and the expansion of investments in the U.S., the momentum for stock price increases remains valid."
* This article has been translated by AI.
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