[Click eStock] "HD Hyundai Heavy Industries Sees Sharp Productivity Growth... Earnings Estimates and Target Price Raised"

On April 25, SK Securities announced that it is significantly raising its earnings estimates for HD Hyundai Heavy Industries, reflecting the company's remarkable productivity improvements and enhanced vessel type mix. The target price was raised from 385,000 won to 480,000 won, while maintaining a 'Buy' investment rating.

Han Seunghan, an analyst at SK Securities, stated, "The company has achieved approximately 29% of its annual order target so far this year, and container ship inquiries in the first quarter increased more than sixfold compared to last year." He added, "In the second half of the year, orders for LNG carriers in the North American region are also expected to begin in earnest, making it likely that the company will exceed its order target."

He further explained, "The company's investment appeal is increasing as the likelihood grows for winning global naval vessel projects and entering the U.S. naval market through collaboration with Huntington Ingalls."

HD Hyundai Heavy Industries recorded consolidated sales of 3.8225 trillion won in the first quarter of this year, up 27.9% from the same period last year. Operating profit surged 1,939.6% to 433.7 billion won, surpassing the market consensus of 262.7 billion won by more than 65%, resulting in a significant earnings surprise. Han analyzed, "Although there were some one-off factors such as the effect of a stronger exchange rate, rapid productivity improvements, increased early input volumes, reduced outsourcing costs through internalization, and an improved vessel type mix were all reflected in the results."

Of the first quarter's sales, 80% came from orders placed in 2022, 16% from 2023, and 4% from 2024. Han explained, "About one-third of the Qatar Phase 1 LNG carrier orders, which are estimated to have mid-single digit construction margins, are included in the current mix. However, as most of these are delivered by the end of this year, we expect a gradual improvement in performance driven by rising ship prices." In particular, the proportion of gas carrier construction is expected to increase gradually each quarter this year and remain in the 70% range in 2026, indicating that the positive impact of the improved vessel type mix will continue.

In the engine segment, HD Hyundai Heavy Industries is also handling OEM orders for HD Hyundai Marine Engine and engine orders for HD Hyundai Mipo Dockyard, which is expected to expand high-margin sales centered on large dual-fuel (DF) engines.