[Edaily Kim So-yeon Reporter] On the 29th, Hana Securities explained that LG Electronics (066570) saw a surge of more than 13% in its stock price on the previous day due to the news of supplying a large-scale cooling system using chillers for large data centers in the US.
Kim Rok-ho, a researcher at Hana Securities, stated in a report on that day, “Although there was no specific mention from the company, providing a new perspective on potential benefits from data centers has had a positive impact on the stock price.” The capacity of the chillers being supplied this time is known to be up to 50,000 refrigeration tons (RT), which is over three times the size of the previous supply history with Starfield.
Researcher Kim mentioned, “LG Electronics’ heating, ventilation, and air conditioning (HVAC) division is the core of the company’s business-to-business (B2B) operations,” adding, “Over half of the air conditioner sales revenue comes from HVAC. This sector has no seasonality and relatively high profitability.” He further analyzed, “It has continuously proven its competitiveness for over 10 years and has been driving revenue growth within the home appliance business unit every year,” stating, “It already has a track record of supplying to dozens of small and large data centers domestically.” He also speculated, “Based on this reference, overseas sales have been ongoing, and it is estimated that overseas data center contracts have been successful through media coverage.”
The HVAC market is a $95 billion market, with the US and Europe accounting for 37% of it. Kim explained that LG Electronics is conducting overseas sales primarily in the US and Europe.
Despite LG Electronics showing strong performance in the first quarter and a favorable guidance for the second quarter, the valuation before the surge in stock price was assessed to be less than 0.8 times the price-to-book ratio (PBR). Researcher Kim diagnosed, “Regardless of the truth about the recent data center contract, with increased spotlight on the supply track record and potential benefits from data centers in the future, it is likely to escape the severely undervalued area.” He forecasted, “Future momentum, such as in the company’s other core B2B businesses like electric vehicles and robots, will be the background for further stock price increases.”