[Click eStock] "Hyundai Heavy Industries, Order Expectations After May... Target Price Up"

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its 'Buy' rating on Hyundai Heavy Industries on the 23rd and raised the target price by 8% from the previous 125,000 KRW to 135,000 KRW.

The stock price of Hyundai Heavy Industries has experienced sharp fluctuations in a short period and has now returned to the level of two months ago. From March 21 to April 20, Hyundai Heavy Industries' stock surged 50.2% in one month. Previously, KB Securities stated that the stock price increase was driven more by the supply-demand effect due to inclusion in the MSCI index rather than fundamentals, and that this effect was expected to dissipate around late April to early May, necessitating an objective evaluation of the industry outlook, earnings, and valuation. In fact, Hyundai Heavy Industries' stock price fell 28.8% in the past month, giving back most of the gains.

The reasons behind the stock price decline include valuation concerns due to the rapid rise in a short period, market downturn, slowdown in order momentum, first-quarter earnings shock, concerns over rising raw material and labor costs, and block deals.

Despite the significant short-term decline, expectations for orders after May are fueling hopes for a stock price rebound. Hyundai Heavy Industries' new orders from January to April amounted to 3.7 billion USD, which is 46.5% of the plan, marking the slowest progress rate within the group. The backlog is also the smallest among large shipbuilding companies, at 34.7 months (2.9 years) relative to this year's expected sales. Hyundai Samho Heavy Industries has already exceeded its order target for this year, so the order momentum after May is expected to be strongest for Hyundai Heavy Industries.

Jeong Dong-ik, a researcher at KB Securities, said, "Despite the recent stock price decline, Hyundai Heavy Industries' price-to-book ratio (P/B) is about 1.8 times, which is relatively high compared to competitors," adding, "However, given the large short-term drop, the order momentum expected to be relatively strong after May is anticipated to enable a stock price rebound."