[Market Focus] HD Hyundai Marine Solution Gains Attention for Profitability... MSCI Inclusion Expectations Rise

HD Hyundai Marine Solution is showing strong performance. This is interpreted as being driven by its high profitability and expectations for inclusion in the Morgan Stanley Capital International (MSCI) index.

As of 10:56 a.m. on July 25, HD Hyundai Marine Solution was trading at 193,600 won, up 4.54% from the previous day.

On this day, Kim Yongmin, a researcher at Yuanta Securities, stated, "In the third quarter, bulk sales in the aftermarket (AM) segment will serve as an additional factor for earnings improvement in the company's main business," and added, "With orders for idle power plant reconstruction packages, third-quarter sales are also expected to expand."

He also noted that expectations for possible inclusion in the Morgan Stanley Capital International (MSCI) index, with constituent changes scheduled for August, could have a positive impact on the stock price. Kim added, "If included in the MSCI, it will clearly have a positive effect on the stock price, and even if inclusion fails and there is a price adjustment, it could be seen as a buying opportunity at a lower price."

In the second quarter, HD Hyundai Marine Solution recorded sales of 467.7 billion won and operating profit of 83 billion won, slightly falling short of consensus. However, despite an unfavorable exchange rate environment, the operating profit margin (OPM) was 17.7%, up 0.6 percentage points from the previous quarter.

He explained, "The market took a conservative approach to the profit margin effects of high-margin Himsen engine bulk sales and short-term eco-friendly solution sales in the first quarter, but in fact, the increase in the AM segment's sales share (80.8% in the second quarter, 73.5% in the first quarter) offset this, allowing the company to maintain high profitability based on its fundamental strength alone."

He continued, "Reflecting the visibility of third-quarter bulk sales and the possibility of future earnings improvement, we have raised our annual earnings per share (EPS) forecast and also increased our target price from 220,000 won to 225,000 won."