[Click eStock] "Pan Ocean, Expected to Reflect China Reopening Effect"

Heungkuk Securities Report

[Asia Economy Reporter Minji Lee] Heungkuk Securities maintained a buy rating and a target price of 8,000 KRW for Pan Ocean on the 22nd. They believe that reflecting the effects of China's reopening, an improvement in performance is expected.

Pan Ocean's estimated sales for the 4th quarter are 1.7 trillion KRW, and operating profit is expected to be 176.9 billion KRW, down 5.8% and 21% respectively compared to the previous quarter. Profitability is expected to decline due to weak bulk carrier market conditions and the payment of performance bonuses in the 4th quarter. Regarding the bulk carrier market, demand for iron ore to China was weak, and seasonal off-season effects were reflected. However, since the petroleum product tanker market remained strong as in the 3rd quarter, it is estimated to have significantly contributed to the 4th quarter performance as well.

Going forward, attention should be paid to the fact that the BDI is rebounding due to the Chinese government's shift to a with-COVID policy. Researcher Byunggeun Lee of Heungkuk Securities said, "Now is the time to focus on the expectation of bulk carrier market improvement following China's reopening," adding, "The point when demand and cargo volume will fully rise is judged to be after the March Two Sessions." As of the previous day, the BDI stood at 1,622 points, indicating that reopening expectations have begun to be reflected. If the Chinese government maintains its current policy stance on reopening and economic stimulus, the BDI rebound is expected to continue despite the off-season.

The operating fleet in the 4th quarter was 280 vessels, slightly increased compared to the 3rd quarter. The researcher explained, "If freight rates rise due to the recovery of raw material demand to China, it is expected that the effect of expanding operating leverage can be anticipated again through further chartering." Finally, the researcher added, "Despite the stock price rising on expectations of China's reopening, the PBR based on next year is only 0.6 times."