[Click eStock] "HD Hyundai Heavy Industries, Quarterly Profitability Improvement Effective... Target Price Up"

Target Price Raised by 2.9% Compared to Previous Level

On the 3rd, KB Securities raised the target price for HD Hyundai Heavy Industries from 340,000 KRW to 350,000 KRW, citing a valid trend of quarterly profitability improvement. The investment rating was maintained at 'Buy.'

Jung Dong-ik, a researcher at KB Securities, explained, "We are raising the target price by 2.9% to reflect changes in earnings estimates," adding, "With the target price adjustment, there is a 20.3% upside potential compared to the closing price on the 1st, so we maintain the Buy rating."

Although the first-quarter earnings this year are expected to fall short of market expectations, the trend of quarterly profitability improvement is expected to remain valid. Researcher Jung said, "The first-quarter earnings are estimated to record sales of 3.6191 trillion KRW, up 21.1% year-on-year, and operating profit of 217 billion KRW, an increase of 920.5%," adding, "Both sales and operating profit slightly miss the consensus (average securities firm forecast), but excluding seasonality, it is judged that the overall quarterly earnings improvement trend will not be damaged." He added, "The operating profit margin, which was 6.0% in the first quarter, is expected to rise to 6.2% and 6.6% in the second and third quarters, respectively, and up to 7.4% in the fourth quarter."

HD Hyundai Heavy Industries' new orders in shipbuilding and offshore in the first quarter of this year recorded 3.26 billion USD, down 10.2% from 3.63 billion USD in the same period last year. Researcher Jung analyzed, "Accordingly, the achievement rate compared to the new order target of 9.75 billion USD set at the beginning of the year is 33.4%," adding, "Although it slightly decreased year-on-year due to the high base last year, it is maintaining a favorable trend compared to this year's plan. The engine and machinery division secured 1.16 billion USD in orders until February, and considering the March estimate, the company's total new orders in the first quarter are estimated to be around 5 billion USD, an increase of more than 10% year-on-year."

Supported by favorable new orders, the backlog of orders based on sales in the shipbuilding and offshore division at the end of February stood at 27.71 billion USD, an increase of 1.97 billion USD compared to 25.74 billion USD at the end of last year. Researcher Jung said, "Since there were no disclosed new orders in March, the backlog likely decreased by the amount of March sales, but even considering this, it corresponds to more than about three years of work compared to the expected sales of 12.7 trillion KRW in this division this year, so there should be no problem for stable earnings growth in the future."