[Click eStock] "Pan Ocean, Q2 Earnings Surprise... Q3 Looks Good Too"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 2nd that it maintains a buy rating and a target price of 9,000 KRW for Pan Ocean. This is because Pan Ocean, which posted strong earnings in the second quarter, is expected to continue its solid performance in the third quarter.

Pan Ocean's sales in the second quarter of this year increased by 52.4% year-on-year to 1.7 trillion KRW, and operating profit rose by 113.2% to 238.8 billion KRW. The operating profit significantly exceeded the market forecast of 175.3 billion KRW. According to Hana Securities, the strong performance was due to a substantial improvement in profitability in the container ship and tanker sectors in the second quarter, following the first quarter. Although the rise in international oil prices increased fuel costs, the rebound of the Baltic Dry Index (BDI) and the rise in the KRW-USD exchange rate also had a positive impact.

Hana Securities explained that shipping freight rates have been adjusting since the third quarter. The BDI, which rose to 3,369 points in mid-May, was around 2,000 points as of early August, while China's steel demand remains sluggish. Furthermore, recent heavy rains at Newcastle Port in Australia caused disruptions in coal exports, contributing to the decline in freight rates.

Nevertheless, Hana Securities expects Pan Ocean to continue delivering strong results in the third quarter. The company expanded its fleet in the second quarter, limiting the impact of spot freight rate declines. Considering the significant reduction in iron ore inventories at Chinese ports in the first half of this year, iron ore imports by China are expected to increase in the fall. This, along with the European ban on Russian coal imports, is anticipated to drive up dry bulk shipping rates.

Seongbong Park, a researcher at Hana Securities, analyzed, "Profitability improvements in the container ship and tanker sectors are expected to continue in the second half of the year, and as we approach the fall season, a simultaneous rise in dry bulk shipping rates is also anticipated. The current stock price has fallen to the lower end of the band and is excessively undervalued."