[Click eStock] "HD Hyundai Mipo, Gradual Profitability Improvement from Second Half... Target Price Down"

Target Price Lowered by 12.5% Compared to Previous Level

On the 5th, KB Securities downgraded the target price of HD Hyundai Mipo from 160,000 KRW to 140,000 KRW, anticipating gradual profitability improvement from the second half of this year. The investment rating was maintained as 'Buy.'

Jung Dong-ik, a researcher at KB Securities, explained, "We lowered the target price by 12.5% reflecting downward revisions in earnings estimates and changes in the applied return on equity (ROE) due to delayed earnings recovery," adding, "Despite the target price downgrade, the recent stock price decline has secured an upside potential of 28.9%, so we maintain the investment rating."

The stock price of HD Hyundai Mipo has fallen 19.1% compared to the end of last year, marking the only negative return among major shipbuilders. Researcher Jung said, "This is due to weak fourth-quarter performance last year, a significantly reduced 2025 order guidance compared to 2024 earnings estimates, absence of the defense sector, and a low proportion of liquefied natural gas (LNG) carriers," and analyzed, "However, due to this stock price decline, the price-to-book ratio (PBR) based on this year's expected earnings has dropped to around 2.0 times, which is the lowest among major listed shipbuilders." He added, "Although currently somewhat out of the market's spotlight, the excessive decline and relative valuation merits could drive a stock price rebound."

Gradual profitability improvement is expected from the second half of this year. Researcher Jung stated, "Operating profit margin in the first half of this year is expected to record 3.6%, showing only a slight improvement compared to the second half of last year, but it could improve to around 4.8% in the second half," explaining, "The low-price order volume from 2022, which accounted for 60% of last year's sales, is expected to decrease to less than 10% this year, and the proportion of high-priced orders for 2024, which was barely reflected in last year's sales, is expected to increase each quarter, exceeding 40% annually."

Dividend increases are also anticipated. HD Hyundai Mipo has not paid dividends for four consecutive years since 2019, but announced a cash dividend of 710 KRW per share based on improved earnings last year. Researcher Jung said, "Through the announcement of a corporate value enhancement plan, the company stated it will pay dividends of more than 30% of net income on a separate basis in the future, so continuous dividend increases are also expected."