[Click Stock] Daehan Shipping to Partially Benefit from BDI Increase

Heungkuk Securities Report

Heungkuk Securities maintained a buy rating and a target price of 3,500 KRW for Daehan Shipping on the 3rd, based on the judgment that the company can benefit to some extent during the rising phase of the Baltic Dry Index (BDI).

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Last year, Daehan Shipping recorded sales of 392.7 billion KRW and an operating profit of 46.3 billion KRW in the fourth quarter, with sales increasing by 12% compared to the same period last year, while operating profit decreased by 25%. The weak BDI in the fourth quarter significantly worsened the irregular shipping performance of subsidiaries, and the number of ships undergoing repairs also caused a decline compared to the previous quarter.

The shipping industry is increasingly optimistic about a BDI rebound due to the recent China reopening effect. Although the BDI recently rebounded to 1,099 points, it remains lower compared to the average BDI in the first quarter of 2021.

Researcher Lee Byung-geun of Heungkuk Securities said, “The company has a portfolio mainly focused on dedicated vessels, so it does not directly benefit significantly from a strong BDI,” but added, “However, it is worth noting that subsidiaries Changmyeong Shipping and Daehan Shipping continue spot market operations.” Daehan Shipping owns five vessels under long-term transport contracts and eight irregular vessels, with about ten bulk charters operating on a one-off basis. Changmyeong Shipping also owns eight vessels, all of which operate in the spot market.

This year, two LNG carriers and one LNG bunkering vessel are scheduled for delivery. For LNG carriers, annual sales per vessel are approximately 30 billion KRW. From the second half of the year, an increase in sales is expected due to a bulk market boom and additional LNG carrier introductions.

Researcher Lee said, “Following the March Two Sessions, industrial activity in China is expected to increase, continuing the strong bulk market,” and analyzed, “Although the recent rise in BDI and expectations for a China turnaround have driven up the stock price, the company’s stock is still undervalued at a PBR of 0.45 times.”