[Click eStock] HSD Engine, Rising Share of LNG·LPG Propulsion Engines... Profitability Improvement

Hana Financial Investment Report
Operating Profit Forecast of 41.8 Billion KRW for Next Year

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 9,000 KRW for HSD Engine on the 23rd.

HSD Engine's third-quarter ship engine sales performance was around 530 billion KRW, compared to last year's annual sales of 560 billion KRW. This surpassed the 400 billion KRW annual sales level recorded in 2018, as the order volume and delivery volume of Korean shipyards showed signs of recovery, leading to an increase in ship engine production and sales performance.

Park Muhyun, a researcher at Hana Financial Investment, stated, "With the increase in shipyard order performance and the growing selection of LNG propulsion specifications, HSD Engine's sales performance next year is expected to reach 1 trillion KRW within 1 to 2 years." This year, HSD Engine's operating performance is projected to be sales of 887.6 billion KRW and operating profit of 25.2 billion KRW, with an operating profit margin of 2.84%.

The proportion of LNG and LPG propulsion engines (dual-fuel low-speed propulsion engines) in HSD Engine's sales increased from about 10% in 2016 to over 40% this year. This is because the proportion of ships equipped with dual-fuel low-speed propulsion engines is increasing in the order and delivery performance of domestic shipyards.

Among the ship contracts ordered by Korean shipyards up to October this year, about 45% of the ships are equipped with dual-fuel propulsion engines. Since most of the ongoing ship order consultations involve LNG and LPG propulsion engine specifications, the proportion of dual-fuel propulsion engines in HSD Engine's sales is expected to increase rapidly.

Researcher Park Muhyun said, "This will raise the order price of ship engines and improve profitability," adding, "Next year, medium-sized LPG carriers and medium-sized container ships applying LNG and LPG propulsion technology will be at the center of the new shipbuilding order market." Next year's operating performance is expected to be sales of 998.9 billion KRW and operating profit of 41.8 billion KRW, with an operating profit margin of 4.18%.