[Click eStock] "HD Hyundai Heavy Industries Approaches 1 Trillion Operating Profit... Target Price Up"

On the 29th, Korea Investment & Securities raised the target price for HD Hyundai Heavy Industries to 260,000 KRW, up 7.4% from the previous target, stating that "operating profit is approaching 1 trillion KRW." The investment rating was maintained as a buy.

On the same day, Kyungtae Kang, a researcher at Korea Investment & Securities, said, "The target price was calculated by applying a price-to-book ratio (PBR) of 3.25 times to the estimated book value per share (BPS) of 80,394 KRW for 2027. There is room to revise the BPS estimate upward depending on new orders for offshore projects." Currently, two offshore construction projects have been secured, and three domestic and international projects with high order potential are being secured as front log (future development projects).

Next year's consolidated sales are expected to reach 16.2151 trillion KRW, and operating profit is forecasted at 1.0558 trillion KRW, representing increases of 12.0% and 56.5%, respectively, compared to this year. Compared to the market consensus, sales are in line, but operating profit is 14.9% below expectations. Researcher Kang said, "The biggest driving force is the merchant ship sector. Next year's operating profit margin for merchant ships is expected to rise by 2.1 percentage points to 8.3% compared to this year, mainly due to the vessels ordered last year and this year, which account for 74% of the total vessels under construction."

He added, "The reason the operating profit estimate is lower than the average forecast is due to the merchant ship operating profit margin," explaining, "Considering that the first batch of Qatar liquefied natural gas (LNG) carriers to be delivered by 2026 accounts for an absolute majority of LNG carrier construction volume, it is difficult to expect more than this."

Other sectors besides merchant ships are also expected to perform steadily. Researcher Kang emphasized, "I want to highlight the significant reduction in losses in the offshore sector. From the second half of next year, two construction projects will be carried out simultaneously, creating sales at the operating profit break-even point level (over 300 billion KRW per quarter), which will compensate for this year's poor performance." He added, "Specialized ships will also maintain sales in the 1 trillion KRW range following this year, supported by the upcoming commissioning of the Korean Destroyer eXperimental (KDX) III Batch II 3rd ship and the construction of the 3rd to 6th Philippine coastal patrol vessels next year."