[Click eStock] "Korea Shipping, the Most Undervalued in Shipping Industry... Investment Opinion and Target Price Up"

[Asia Economy Reporter Myung-hwan Lee] Korea Investment & Securities announced on the 30th that it is upgrading its investment opinion on Daehan Shipping from neutral to buy and raising the target price to 4,300 KRW. This is due to the stock being undervalued compared to its profit growth over the past year.

Korea Investment & Securities pointed out that Daehan Shipping has shown steady performance improvement with profits increasing for five consecutive quarters recently. Operating profits in Q4 last year and Q1 this year rose by 71% and 81% respectively compared to the same periods last year, significantly exceeding expectations. Korea Investment & Securities had previously given a neutral rating on Daehan Shipping last year because spot freight rates and stock price volatility in the shipping sector had become unpredictable. However, now is the time when the world is preparing for reopening, and pandemic uncertainties have peaked.

Korea Investment & Securities expects the company's operating profit this year to reach 278.9 billion KRW, a 37% increase from last year. Daehan Shipping's separate basis irregular shipping revenue accounts for only about 10%, indicating a stable revenue structure centered on dedicated vessels. Instead, Daehan Shipping's growth strategy focuses on acquiring other shipping companies at prices lower than the value of their vessels. Last year in Q4, Daehan Shipping acquired Changmyeong Shipping, which owns seven bulk carriers and one tanker, and through Daehan Shipping Lines, a subsidiary incorporated in 2016, it has been expanding spot operations to increase profits. Starting this year, new liquefied natural gas (LNG) dedicated vessels will be delivered.

Choi Go-woon, a researcher at Korea Investment & Securities, said, "The container ship business (SM Shipping), which was noted as a new growth engine, has been transferred to another affiliate, but LNG vessels will fill that gap," adding, "bulk shipping supply and demand will structurally improve until 2023, and given the growing potential of the LNG vessel market, I recommend focusing more on undervaluation appeal than uncertainty."