Sanil Electric recorded a clear growth trend in the second quarter as well, driven by expanding demand for renewable energy and data centers. Both revenue and operating profit showed double-digit growth rates, and the operating margin also rose, demonstrating simultaneous scale expansion and profitability improvement.

Q2 Revenue of KRW 164.2 Billion and Operating Profit of KRW 62 Billion According to LS Securities, Sanil Electric's consolidated revenue for the second quarter of 2026 reached KRW 164.2 billion, up 28% year-on-year. Operating profit stood at KRW 62 billion, a 34% increase over the same period. The operating margin recorded 37.8%, rising 1.8 percentage points year-on-year and 0.9 percentage points quarter-on-quarter. LS Securities evaluated that the figures slightly exceeded existing forecasts, with high growth in the renewable energy and special transformer segments driving overall performance.

Renewables and Special Transformers +52% vs. Power Grid -31%: Diverging Trends Segment trends showed a clear divergence. Revenue in the renewables and special transformer business surged 52% year-on-year, while power grid segment revenue declined by 31%. LS Securities analyzed that the robust growth trend in the special transformer sector, which has been applied to renewable energy, data centers, BESS, and data center BTM (On-Site) generation since the second quarter of last year, is continuing and serves as the core driver of Sanil Electric's overall growth.

Greater Significance in Profitability Improvement LS Securities emphasized that the Q2 profitability improvement holds even greater significance, considering that there was a one-time operating profit increase factor of approximately KRW 2 billion in the first quarter due to the recovery of past bad debt write-offs. This is because the operating margin increased compared to the previous quarter despite the reverse burden caused by the one-time profit. The operating leverage effect from revenue expansion and the increased proportion of high-margin special transformer sales are analyzed as the primary factors driving profitability improvement.

AI and Data Center Investments Drive Transformer Demand The expansion of data center investments, driven by the proliferation of the artificial intelligence (AI) industry, is also a major variable shaping medium- to long-term demand in the transformer market. Large-scale data centers require dedicated power infrastructure investments to ensure a stable power supply. If investments expand beyond the data centers themselves to include power grids, power generation facilities, and energy storage systems, demand for high-specification transformers is likely to increase in tandem.

Rebound Potential in the Power Grid Segment Draws Attention The currently sluggish power grid business is also a future focal point. LS Securities sees potential for medium- to long-term growth to rise again, driven by power grid reinforcement needs in the U.S. market and the expansion of dedicated power grid projects for data centers. In particular, it noted that demand for high-voltage, large-capacity distribution transformers of 50kV and above is growing rapidly. If demand for high-specification products expands, the growth trend in the power grid segment is projected to strengthen from 2027 onward, alongside improvements in the product mix.

Order Flow Determines Earnings Visibility As the transformer industry experiences a time lag between receiving orders and actual revenue recognition, new orders and an increase in the order backlog are key indicators for gauging future performance. LS Securities analyzed that special transformer orders could continue to rise if projects related to data centers, renewable energy, and BESS expand. How quickly new orders convert into revenue is the core point for sustainable growth.

'Potential for Undervaluation Compared to Competitors' Despite continued earnings growth and order expansion, LS Securities mentioned the possibility of relative undervaluation, stating that the company's corporate value is not fully reflected when compared to competitors. However, valuation judgments require a comprehensive comparison of forecasted earnings, order backlogs, and competitor multiples.

Sanil Electric's medium- to long-term performance will likely hinge on several key checkpoints: sustained demand for special transformers, the potential for expanding its growth axis into the power grid sector, the ability to maintain an operating margin exceeding 37%, and the trend of new order expansion.

[This article was written based on analysis and performance figures presented in an LS Securities report. It is not intended to solicit investment in any specific stock. Investment decisions and responsibilities lie solely with the investor. This article was written with AI assistance.]