Time to Grab Hold of Opportunity
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
Doosan Enerbility is a maker of key equipment for large-scale NPPs, SMRs, and offshore wind projects, which are all to be essential in achieving energy security. We believe that the company’s somewhat demanding valuations are justified by its promising mid/long-term growth prospects.
Nuclear and wind power markets offer attractive opportunities
We initiate coverage on Doosan Enerbility at Buy with a TP of W17,000, noting its competitiveness as a manufacturer of key equipment for nuclear and offshore wind power—key sources of power in achieving carbon neutrality and energy security. Good opportunities are to be found from: 1) the firm’s experience in providing key equipment for KEPCO’s APR 1400 and Westinghouse’s AP 1000 reactors; 2) its contract with NuScale, a SMR maker set to begin commercial operations earlier than its rivals; and 3) the launch of DS205-8MW, a low-speed large-scale offshore wind turbine to be launched in 2023.
We calculated our SOTP-based TP of W17,000 by applying an EV/EBITDAmultiple to each division’s 2025F earnings. We reflect a WACC of 8.7%. Among 2025F new orders of W10.8tn, the firm’s new businesses (large-scale NPPs, SMRs, and offshore wind power) should represent as much as 49% (W5.3tn). Our TP is equivalent to a 2023F P/E of W20x and a P/B of 1.4x.
Time to grab hold of opportunity
During financial restructuring processes in the past, Doosan Enerbility (formerly DHIC) left an unfavorable impression with capital market participants due to a series of events, including a rights offering and disposals of stakes in subsidiaries. Although related issues have yet to be fully resolved (given an uncertain external environment and an unstable downstream market), Doosan Enerbility is still capable of making preemptive investments, depending upon business conditions for downstream markets. And, via recent fundraising, the firm has reached its financial targets. Thus, with the firm having well-prepared to make equipment investment, its valuations are set to improve.