"All Joseonsa Q4 Operating Profits Expected to Exceed Consensus"

On the 15th, Korea Investment & Securities predicted that all shipbuilders will achieve operating profits exceeding consensus in the fourth quarter. Among the shipbuilders, Hanwha Ocean is expected to see the greatest improvement in operating profit due to exchange rate effects.

In a report released that day, Kyungtae Kang, a researcher at Korea Investment & Securities, stated, "The combined consolidated operating profit of the five covered companies is expected to exceed consensus by 9.4%. The key points to watch are the exchange rate effect, lump-sum settlement of wage collective bargaining, and the price negotiation of steel plates. Among these, Hanwha Ocean will see the largest improvement in operating profit due to the exchange rate effect."

The combined consolidated sales of the five companies in the fourth quarter are estimated to increase by 20.5% year-on-year to KRW 18.2829 trillion, and operating profit is expected to rise by 324.6% to KRW 1.1241 trillion.

He cited four reasons why the shipbuilding sector outperformed the index return during this year's comprehensive index rebound phase. Researcher Kang said, "The market reflects four factors in shipbuilders' stock prices: the merchant ship cycle, the strength of the US dollar, offshore defense, and engine value. These four factors explain why the shipbuilding sector was strong during the KOSPI index downturn in the second half of 2024, and they are also the core reasons why the shipbuilding sector will outperform the index return during the comprehensive index rebound phase in 2025."

He maintained HD Hyundai Mipo as the top-pick in the shipbuilding sector. Researcher Kang explained, "It is the only shipbuilder that can apply the valuation multiples received by shipbuilders during the 2000s super cycle for merchant ship operators without any discount."

He added, "Excluding the values of merchant ships and engine machinery that can be reflected in earnings estimates, the premium assigned to offshore defense may temporarily increase the volatility of shipbuilders' stock prices."