[Click eStock] "Hyundai Heavy Industries, Still the Top Pick"

Challenging Eco-Friendly Business Based on Strong Financial Soundness
Cape Investment & Securities "Hyundai Heavy Industries Target Price Set at 132,000 Won"

[Asia Economy Reporter Gong Byung-sun] Hyundai Heavy Industries is expected to demonstrate outstanding profitability, surpassing its annual order target as of the end of the third quarter this year. Based on financial soundness, it is also preparing for mid- to long-term future businesses such as maritime green hydrogen infrastructure. Accordingly, securities firms have selected it as the top preferred stock among shipbuilding stocks.

According to Cape Investment & Securities on the 19th, Hyundai Heavy Industries secured orders worth $9 billion (approximately 10.6425 trillion KRW) as of the end of the third quarter this year, achieving 140.8% of its annual order target. Among these, the proportions are 44% for container ships, 35% for liquefied natural gas (LNG) carriers, and 14% for liquefied petroleum gas (LPG) carriers, in that order.

(Provided by Cape Investment & Securities)

Profitability improvement is also expected going forward. In the second half of last year, the Shanghai Containerized Freight Index (SCFI) surged, leading to a flood of container orders this year, and Hyundai Heavy Industries secured 27 ultra-large container ships of 12,000 TEU or more (1 TEU is approximately one 6-meter container). Among these, 12 ships are LNG-powered vessels, and 8 are the world's first large methanol-powered ships. Orders were placed mainly for highly profitable vessels.

Kim Yong-min, a researcher at Cape Investment & Securities, explained, “While installing eco-friendly engines, Hyundai Heavy Industries has reported orders mainly for container ships and LNG carriers, and secured stable order volumes in the second and third quarters when new ship prices began to rise significantly. From 2023, when revenue recognition begins, it is expected to show a remarkable improvement in profitability.”

It is also expected to challenge eco-friendly businesses based on solid financial soundness. Despite the order slump in recent years, the group minimized operating losses through common cost allocation at the group level and economies of scale. At the time of its initial public offering (IPO), Hyundai Heavy Industries successfully completed a paid-in capital increase and announced that it would spend about 760 billion KRW on eco-friendly and research and development. Researcher Kim said, “When additional funds are needed in the future to develop smart yards, eco-friendly ships, and autonomous ship navigation systems, this kind of financial soundness will stand out as a competitive advantage.”

Accordingly, Cape Investment & Securities newly issued a “Buy” investment opinion and a target price of 132,000 KRW for Hyundai Heavy Industries. The closing price on the previous day was 106,000 KRW. Researcher Kim emphasized, “In all aspects such as vertically integrated business structure, scale of operations, and eco-friendly ships, it ranks first among global shipbuilders. Although there is an overhang risk (potential large-scale sale waiting volume) due to lock-up, it is the top preferred stock that will help improve the market conditions in the long term.”