[Click eStock] “Doosan Fuel Cell, Demand Created by RPS”

Operating Profit in Q4 Last Year Fell 38.56% Short of Consensus
Meritz Securities "Doosan Fuel Cell Target Price Lowered from 71,000 KRW to 64,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Doosan Fuel Cell is expected to miss market consensus for its fourth-quarter earnings last year due to delayed orders. Although the Clean Hydrogen Power Supply Obligation System (CHPS) has not yet been established, demand is expected to be generated through the Renewable Portfolio Standard (RPS).

On the 12th, Meritz Securities estimated Doosan Fuel Cell's fourth-quarter sales last year to be 146.2 billion KRW, down 7.3% year-on-year, and operating profit to be 9.4 billion KRW, up 67.1% during the same period. The operating profit is about 38.56% below consensus.

The delayed orders are interpreted to have a negative impact on performance. There was an expectation that some orders would be recognized early in the fourth quarter last year, but since the orders were placed at the end of last month, recognition in the fourth quarter became difficult. On the 23rd of last month, Doosan Fuel Cell disclosed that it had signed a fuel cell system supply contract worth 461.8 billion KRW.

Accordingly, Meritz Securities maintained a 'Buy' rating on Doosan Fuel Cell but lowered the target price from 71,000 KRW to 64,000 KRW. The closing price on the previous day was 41,800 KRW.

However, achieving a large order is a positive factor. The 461.8 billion KRW order is the highest amount ever. Furthermore, it is expected that announcements of large-scale orders around 100 megawatts (MW) will increase. Revenue recognition for these projects is expected to begin in the second half of this year.

Demand is steadily generated through the RPS. Amendments to the Hydrogen Act, including CHPS, were not approved in July, November, and December last year, nor this month. The amendments are expected to be approved in the second half of this year after the presidential election. However, the RPS is expected to prevent demand slowdown. This year, the RPS ratio increased by 3.5 percentage points from the previous year to 12.5%.

Moon Kyung-won, a researcher at Meritz Securities, explained, “When the RPS increased by 2 percentage points last year, a fuel cell market of about 200 MW for power generation was created. This year, market demand of over 300 MW can be expected.”

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