[Click eStock] "HSD Engine, Approaching Ship Cycle... Expected Benefits for Ship Engines"

[Asia Economy Reporter Park Jihwan] Daishin Securities forecasted on the 8th that ship engine companies, including HSD Engine, will benefit from the upcoming ship cycle.

HSD Engine, established in 1999, is a specialized company in ship diesel engines (low-speed, medium-speed). It possesses the world's second-largest diesel engine production facilities. Major domestic customers include Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, which do not have engine subsidiaries. Last year, it held an 18% market share (M/S) in the Chinese market.

Researcher Lee Taehwan of Daishin Securities stated, "Low-speed engines are essential equipment for large commercial vessels, so an increase in the number of ships from domestic shipbuilders will directly lead to an increase in engine orders," adding, "With strong new orders this year, the current order backlog is at a comfortable level, and based on improved price negotiation power, further improvement in new order margins is expected."

In particular, the proportion of DF engines in the order backlog is expanding, and the rising preference for DF engines is favorable in terms of profitability and creates a favorable environment for securing market share in China. HSD Engine recorded new orders worth 382.4 billion KRW in the first quarter of this year, rapidly securing orders centered on DF engines.

The earnings outlook is also bright. Annual sales this year are expected to be 583 billion KRW, a 29.8% decrease compared to the previous year. An operating loss of approximately 8.4 billion KRW is anticipated. The researcher said, "Due to a decline in shipments caused by poor orders in 2019-2020, fixed cost burdens are expected," and added, "A quarterly profit turnaround is expected in the second half of the year as volume increases."

He added, "The order flow in the second quarter is also reported to be good," and said, "Based on ample workload and increased engine price negotiation power, selective ordering is possible."