Will HD Korea Shipbuilding & Offshore Lead the Shipbuilding Stock Rally by Breaking the Box Range?

Securities Sector, Target Price Up in the Last Month
LNG's Biggest Beneficiary Highlighted
Adequate Shareholder Return Capacity... Expecting Value-Up Disclosure

Market attention is focused on whether HD Korea Shipbuilding & Offshore can maintain its upward momentum. Securities firms analyzed that, along with the subsidiary effect showing strength in liquefied natural gas (LNG) carriers, it is necessary to pay attention to HD Korea Shipbuilding & Offshore's shareholder return capabilities as the intermediate holding company of HD Hyundai Group.

According to financial information provider FnGuide on the 13th, a total of four securities firms raised their target prices for HD Korea Shipbuilding & Offshore over the past month. The highest target price was set by Korea Investment & Securities, which raised it from 260,000 KRW to 330,000 KRW. Other adjustments included Shin Young Securities (260,000 KRW → 300,000 KRW), Kiwoom Securities (290,000 KRW → 300,000 KRW), and Samsung Securities (223,000 KRW → 242,000 KRW). Despite HD Korea Shipbuilding & Offshore's stock price rising more than 74% since the beginning of the year based on the previous day's closing price, they judged that there is further upside potential, supported by the record-breaking 'super cycle' boom in the shipbuilding industry.

In the securities industry, although the shipbuilding sector's stock prices have generally risen significantly, making it burdensome, HD Korea Shipbuilding & Offshore is analyzed to be relatively easier to approach. Youngsoo Han, a researcher at Samsung Securities, said, "HD Korea Shipbuilding & Offshore is an intermediate holding company holding shares in HD Group's shipbuilding affiliates, so its corporate value is determined by the value of its affiliate shares. Applying the sum-of-the-parts valuation method makes it easier to raise the appropriate value." He added, "Since the stock prices of the group's shipbuilders have risen sharply since the beginning of the year, HD Korea Shipbuilding & Offshore could be an alternative for investors considering late investments."

Positive expectations are also driven by forecasts of increased demand for LNG carriers. With the election of U.S. President Trump, who pledged to increase oil and natural gas extraction and remove related regulations, it is expected that LNG exports will increase, benefiting from the expansion of LNG cargo volume. Kyungjae Wi, a researcher at Hana Securities, said, "The production capacity (CAPA) of global LNG liquefaction terminals currently under construction is 1.9 billion CBM (cubic meters), which will expand about threefold compared to now." He added, "In this process of the LNG era arriving, HD Korea Shipbuilding & Offshore can benefit from LNG carriers through its subsidiaries HD Hyundai Heavy Industries and HD Hyundai Samho." He further forecasted, "In the future LNG carrier new order process, the order backlog will increase, and performance will improve during the delivery of high-priced vessel types. Next year's performance is expected to show sales of 28.7 trillion KRW, up 13.9% year-on-year, and operating profit of 2.6 trillion KRW, up 85.3%."

Expectations for year-end dividends and other shareholder returns are also evaluated as factors that can stimulate investor sentiment. Kwangsik Choi, a researcher at Daol Investment & Securities, said, "Since the subsidiaries' dividend payout ratio is over 30% of separate net income, assuming HD Korea Shipbuilding & Offshore, as an intermediate holding company, has a dividend payout ratio including treasury stock buyback and cancellation of 40%, this year's dividend yield could start at 2.7% and expand to 8.1% by 2026." He noted, "It will stand out as an attractive year-end dividend stock."

Researcher Youngsoo Han also analyzed, "With 1.075 trillion KRW in net cash on a separate basis at the end of the third quarter, the financial conditions are in place to implement shareholder return policies." He added, "Considering the high dividend payout ratio of the parent company HD Hyundai, there is also an incentive for HD Korea Shipbuilding & Offshore to actively execute shareholder return policies. If a corporate value enhancement plan is announced at year-end, there is a possibility that the market's assumptions about HD Korea Shipbuilding & Offshore's shareholder return policies will change."