[Click eStock] "Daewoo Shipbuilding & Marine Engineering, Performance Decline Due to One-Time Factors... Investment Rating Down"

Kyobo Securities Report

Kyobo Securities lowered its investment rating on Daewoo Shipbuilding & Marine Engineering to Trading Buy on the 7th and set the target price at 26,000 won, unchanged from the previous level.

[Image source=Yonhap News]

Daewoo Shipbuilding & Marine Engineering's Q4 sales amounted to 1.4492 trillion won, a 6.9% increase year-on-year, meeting market expectations. However, the annual sales for last year were 4.8 trillion won, significantly below the market expectation of 6.6 trillion won. The operating loss continued at 416.1 billion won.

Researcher Ahn Yudong of Kyobo Securities stated, "The reason for falling short of market expectations was due to delayed sales recovery compared to the company's guidance, which increased fixed cost burdens, along with one-off factors such as provisions and exchange rates."

Among the one-off factors, a profit of 105 billion won was generated due to contract price changes including the reversal of delay compensation for the offshore project NOC FP, but a cost increase of 365 billion won occurred due to rising processing costs from subcontractor price hikes. Additionally, a recurring loss of 133 billion won was reflected due to the impact of the order backlog from exchange rate declines and fixed cost burdens.

The company's sales guidance for this year is 9.4 trillion won, representing a 94% increase compared to the previous year. Researcher Ahn said, "It should be considered that the management plan was established assuming a high exchange rate last year and smooth manpower supply. However, the volume not recognized as sales last year will be deferred, so performance is expected to show an upward trend."

Furthermore, Researcher Ahn Yudong added, "Although some of this has been partially priced into the stock, the corporate merger review by Hanwha Group, expected to be completed within the first half of the year, and the inflow of funds will partially alleviate financial instability."