Hanwha Ocean, Unstoppable Voyage... Rising Expectations

Stock Price Rises 14.9% This Year
Foreigners Net Buy 117.1 Billion Won in One Day
Expectations Grow for Fili Shipyard's Increasing Role

Hanwha Ocean's stock price continues its upward trend this year. Since recording an operating profit in the third quarter of last year, expectations for performance improvement due to the normalization of production processes have increased. The announcement by then U.S. President-elect Donald Trump that he would rebuild the U.S. Navy and shipbuilding industry in cooperation with allied countries also stimulated investor sentiment.

According to the financial investment industry on the 8th, Hanwha Ocean's stock price rose 14.9% over four days this year. Considering that the KOSPI rose 3.9% during the same period, the return on investment outperformed the market by 11 percentage points. Foreign investors led the stock price increase by purchasing 117.2 billion KRW worth of Hanwha Ocean shares in a single day on the 7th.

Hanwha Ocean is a shipbuilding company that constructs various ships and warships. It also builds offshore facilities such as Floating Production Storage and Offloading units (FPSO) and fixed platforms. Hanwha Aerospace is the largest shareholder, holding a 23.14% stake as of the end of September last year. Including Hanwha Systems and related parties, the total shareholding ratio is 46.28%.

President-elect Trump, immediately after his election, urged cooperation in the shipbuilding sector during a phone call with President Yoon Suk-yeol. On November 6 last year, during a call with President Yoon, he said, "I know Korea's shipbuilding capabilities," and added, "Cooperation with Korea is also needed in the areas of maintenance, repair, and servicing." Two months later, on the 6th (local time), in a radio interview, he reiterated, "We may also need to utilize allied countries for shipbuilding," emphasizing the point again.

Hanwha Ocean, together with Hanwha Systems, completed all procedures for acquiring the Philly Shipyard in Philadelphia, USA, at the end of last year. Hanwha Ocean plans to strengthen its position in the North American shipbuilding market based on the production capacity and market experience of the Philly Shipyard.

Yang Hyung-mo, a researcher at DS Investment & Securities, explained, "Philly Shipyard will produce some aircraft carriers, submarines, and destroyers to be delivered to U.S. defense contractors Huntington Ingalls and General Dynamics." He added, "These could be next-generation Columbia-class ballistic missile submarines, Virginia-class attack submarines, Gerald R. Ford-class aircraft carriers, or destroyer modules," and noted, "We are building relationships with Huntington Ingalls and General Dynamics to secure subcontracting orders."

After the third-quarter earnings announcement last year, stock market experts positively evaluated the decrease in one-time costs related to subcontracting expenses and delay penalties, which contributed to process stabilization. Han Young-soo, a researcher at Samsung Securities, said, "This shows that Hanwha Ocean's production process is normalizing," and added, "Considering the exchange rate, Hanwha Ocean can expect a significant improvement in profitability compared to the previous quarter."

Jung Yeon-seung, a researcher at NH Investment & Securities, also said, "Hanwha Ocean's profitability improvement was relatively slow compared to competitors due to construction delays," but predicted, "Starting this year, the impact of construction delays will be resolved, and profitability will improve." He further expected, "Annual sales from maintenance of about 4 to 5 U.S. naval vessels will occur," and "Submarine construction sales in the special ship sector will increase starting this year."