[Click eStock] "CS Wind, Focus on Industry Improvement Over Short-Term Earnings Slump"

[Asia Economy Reporter Song Hwajeong] Meritz Securities maintained a 'Buy' rating and a target price of 107,000 KRW for CS Wind on the 1st, noting that although the company's third-quarter performance this year is expected to be weak, attention should be paid to the improvement in the industry conditions.

CS Wind's third-quarter results are expected to fall significantly short of market consensus due to operational disruptions caused by COVID-19. Meritz Securities estimated CS Wind's third-quarter consolidated operating profit to be 17.7 billion KRW, a 44.1% decrease compared to the same period last year. This figure is far below the consensus of 31.8 billion KRW. Researcher Moon Kyungwon of Meritz Securities explained, "Since June, COVID-19 has spread in major production bases such as Vietnam and Malaysia, leading to operational restrictions imposed by governments in each country. Considering that the production shortfall will be deferred to the fourth quarter and that most production personnel returned in September, the impact on annual sales is limited. However, due to manufacturing overhead costs to handle the deferred volume, margin expectations need to be lowered."

The improvement in industry conditions driven by overseas policy momentum is positive. Researcher Moon said, "If the US secondary infrastructure package is passed as planned in the fourth quarter, the implementation of the CEPP (Clean Electricity Payment Program) will mandate an annual 4 percentage point increase in the share of eco-friendly power generation, and the wind power support PTC (Production Tax Credit) and ITC (Investment Tax Credit) will also be extended. As a result, the average annual renewable energy installation volume in the US over the next 10 years is highly likely to more than double compared to this year." Additionally, the recent decision by the European Union (EU) to impose anti-dumping tariffs of 7-20% on Chinese wind tower manufacturers, combined with increased domestic demand in China, is expected to reduce Chinese exports and lead to a rise in CS Wind's market share.

Researcher Moon stated, "The short-term performance downturn is not due to structural problems, while policy momentum is approaching. It is a time to focus on industry improvement rather than immediate numbers."

This content was produced with the assistance of AI translation services.