[Click eStock] "HD Korea Shipbuilding & Offshore Engineering Expected to Extend Share Price Rally... Target Price Raised"

Target Price Raised by 29.2% Compared to Previous Estimate

On June 13, KB Securities announced that it expects the upward trend in the share price of HD Korea Shipbuilding & Offshore Engineering to continue, raising its target price from 325,000 won to 420,000 won. The investment opinion remains 'Buy'.

Jung Dongik, a researcher at KB Securities, explained, "We have raised the applied return on equity (ROE) by adjusting the discount rate in response to recent changes in market perception regarding holding companies. We also reflected revisions to profit estimates based on the strong performance outlook for subsidiaries, resulting in a 29.2% increase in our target price compared to the previous figure."

The share price of HD Korea Shipbuilding & Offshore Engineering has risen by nearly 50% so far this year, significantly outperforming the KOSPI's increase of 21.69%. Researcher Jung commented, "Despite this share price increase, we expect the strong momentum to continue. This is because, even in the face of negative industry factors such as a decline in new orders compared to the same period last year, a drop in newbuilding prices, and a weaker exchange rate, the possibility of further share price gains in the shipbuilding sector remains high due to factors such as a rising market, expectations for improved cooperation in shipbuilding between Korea and the United States, and anticipated earnings improvements."

The valuation is still considered attractive. Jung stated, "Based on the 2025 consensus (the average forecast by securities firms), HD Korea Shipbuilding & Offshore Engineering's 12-month forward price-to-book ratio (PBR) is only 1.7 times, whereas HD Hyundai Heavy Industries and Hanwha Ocean are at 5.0 times and 4.0 times, respectively, and Samsung Heavy Industries and HD Hyundai Mipo are at 3.1 times and 3.0 times, respectively." He added, "The holding company structure is the main reason for this valuation gap, but as overall re-evaluation of holding companies is underway in light of the new government's push for amendments to the Commercial Act and moves toward separate taxation of dividend income, HD Korea Shipbuilding & Offshore Engineering is likely to benefit from this trend as well."

The company's second-quarter results this year are expected to be solid. Jung said, "HD Korea Shipbuilding & Offshore Engineering's second-quarter results are projected to show sales of 7.5901 trillion won, up 14.7% year-on-year, and operating profit of 982.6 billion won, up 161.0%. Both figures are expected to exceed consensus estimates." He explained, "This is because, while newbuilding prices are rising, productivity is improving overall due to increased proficiency among foreign workers, which is accelerating the production schedule, and raw material prices are continuing to stabilize downward."