[Click eStock] Hyundai Mipo, Profit Improvement Slows Down... Target Price Down

NH Investment & Securities announced on the 31st that it is lowering the pace of profit improvement for Hyundai Mipo Dockyard this year. However, it maintained a 'Buy' investment rating and lowered the target price by 8% to 103,000 KRW.

Researcher Jeong Yeonseung of NH Investment & Securities analyzed, "The target price downgrade is due to a 6% and 8% reduction in operating profit estimates for 2023 and 2024, respectively." This reflects that the pace of profit improvement is slower than expected as low-profit shipbuilding continues throughout the year.

However, he assessed that the direction of profit improvement until 2025 is clear. Researcher Jeong said, "In 2023, orders were received for highly profitable petrochemical product carriers, medium-sized LPG carriers, and methanol-powered container ships," adding, "It is expected to achieve a structural operating profit turnaround starting in the second half of the year."

Additionally, the qualitative changes seen in new orders and the rising ship prices in medium-sized vessels are positive. As of 2023, Hyundai Mipo Dockyard has secured orders worth 2.1 billion USD, achieving 57% of the annual order target of 3.7 billion USD.

While orders for the main ship type, petrochemical product carriers (PC ships), are increasing, new ship prices are also rising. Orders for highly profitable medium-sized LPG carriers and dual-fuel (such as methanol) container ships, which are priced 15-20% higher than existing vessels due to fuel replacement, have also been successful.

Researcher Jeong stated, "The new ship prices for the main ship types mentioned above have increased by an average of 37% compared to the end of 2020," and added, "In the case of petrochemical product carriers, the Russia-Ukraine war has changed Europe's petrochemical product supply sources, increasing transport distances and leading to strong freight rates."

He analyzed that the rise in new ship prices is linked to the replacement of aging ships due to a long-term order gap. Researcher Jeong added, "Although tanker freight rate volatility is high due to concerns about economic slowdown, the construction capacity of global shipyards, especially for large vessels, is decreasing, which is expected to accompany a strong new ship price trend for medium-sized vessels."