Shinhan Investment Corp. announced on October 27 that it has lowered the target price for CS Wind from 78,000 won to 68,000 won, reflecting a slowdown in the recovery of short-term orders. However, the firm maintained its 'buy' rating, citing a solid growth foundation in the tower segment based on the recovery of onshore wind demand, productivity improvements at its U.S. subsidiary, and increased volume.
Choi Min-ki, a senior researcher at Shinhan Investment Corp., stated, "If the Democratic Party expands its control in the upcoming U.S. midterm elections, it could lead to increased checks on the administration. Even if the restoration of tax credits does not occur, we can expect a reduction in uncertainties surrounding wind power permits, which would alleviate concerns about medium-term orders and restore investor sentiment."
The company's operating profit for the third quarter is expected to fall short of market expectations, but annual performance is projected to align with consensus estimates. Choi noted, "The third-quarter operating profit is estimated to be 78.3 billion won, a 19% increase compared to the same period last year, but it is expected to be 4% below consensus. This is due to deferred tower sales and a decline in the won-dollar exchange rate, which affected revenue and profits when converted to won."
He added, "Incentives for substructures were concentrated in the third quarter, helping to defend profitability. With deferred revenue in the fourth quarter, annual performance is expected to meet consensus estimates."
Annual new orders are anticipated to remain at last year's level due to delays in U.S. permits and postponed orders from Chinese turbine manufacturers. He stated, "Annual new orders are expected to be around $1.5 billion, as confirmed by the order trends of major turbine customers like Nordex, indicating a recovery in demand primarily for onshore wind."
Choi further remarked, "Despite the expiration of substructure incentives in 2027, productivity improvements and increased volume at the U.S. subsidiary, along with contributions from AMPC, are expected to drive profit growth in the tower segment. Strong onshore wind demand and reduced production capacity among local tower competitors in the U.S. are likely to raise expectations for the supply-demand environment after the AMPC sunset."
Despite the lowered target price, the current stock price is assessed to be at the lower end of its historical valuation band.
Choi explained, "Reflecting the adjustment in the pace of short-term order recovery, we have lowered the target multiple (PBR 2x) and reduced the target price by 13%. The current stock price is at a 12-month forward price-to-book ratio (PBR) of 1.2x and a price-to-earnings ratio (PER) of 9x, which is at the lower end of its historical valuation band."
He also noted, "Despite the increased support for wind power in Europe, offshore wind projects are experiencing some delays due to high interest rates and development costs. However, orders from turbine manufacturers continue to flow, ensuring a solid growth foundation for the tower segment."
* This article has been translated by AI.
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