[Special Stock] "HD Hanguk Joseon Haeyang, Long-term Performance Improvement Begins This Year... Target Price Up"

Target Price Raised from 130,000 Won to 170,000 Won

On the 30th, KB Securities raised the target price for HD Hyundai Heavy Industries from 130,000 KRW to 170,000 KRW, anticipating that mid- to long-term performance improvements will begin in earnest this year. The investment rating was maintained at 'Buy.'

Jung Dong-ik, a researcher at KB Securities, explained, "The target price adjustment reflects upward revisions in earnings estimates for subsidiaries due to order intake and a strong exchange rate, changes in the applied return on equity (ROE), changes in the 12-month forward period, and changes in the one-year Treasury bond rate used as a proxy for the risk-free rate. With the target price adjustment, there is a 26.6% upside potential compared to the previous closing price, so the investment rating is maintained."

HD Hyundai Heavy Industries recorded cumulative new orders from January to April this year (consolidated basis) of $9.64 billion in shipbuilding, $1.17 billion in offshore plants, and $1.05 billion in engines and machinery, totaling $11.86 billion (approximately 16.26 trillion KRW), a 4.4% increase compared to the same period last year. Researcher Jung analyzed, "The achievement rate compared to the new order target of $15.83 billion set at the beginning of the year reached 75%, indicating a high likelihood of significantly exceeding the target. By subsidiary, HD Hyundai Heavy Industries achieved $5.15 billion, 54% of the plan; HD Hyundai Samho achieved $3.57 billion, 111.4%; and HD Hyundai Mipo achieved $3.15 billion, 101.7%."

Mid- to long-term performance improvements are expected to begin in earnest from this year. Researcher Jung said, "As major subsidiaries secure large orders amid rising new ship prices and favorable exchange rates, mid- to long-term performance improvements will start in earnest from this year. Although how Hyundai Heavy Industries responds to the low-profit Qatar LNG ship volume is a key issue, securing cost competitiveness through in-house production of equipment within the group and bulk purchasing will enable additional profit gains compared to competitors."

KB Securities estimates HD Hyundai Heavy Industries’ Q2 performance this year at 6.1022 trillion KRW in sales and 230.6 billion KRW in operating profit, representing increases of 11.9% and 223.6% respectively compared to the same period last year. Researcher Jung stated, "Sales are expected to slightly exceed consensus (average securities firm forecasts), and operating profit is expected to slightly fall short, but the differences are not significant enough to be an issue. However, pre-tax profit will significantly exceed consensus due to a one-time gain of about 140 billion KRW from the sale of HD Hyundai Heavy Industries shares on May 17."