[Click eStock] "HD Hyundai Heavy Industries Still Has Room for Profit Growth... Target Price Raised"

On August 1, Hana Securities raised its target price for HD Hyundai Heavy Industries to 5.7 million won per share, an increase of 16.3% from the previous target.

Yoo Jaeseon, a researcher at Hana Securities, stated in a report released on the same day, "From a profit perspective, there is still significant growth potential remaining," as he raised the target price for HD Hyundai Heavy Industries and maintained a 'Buy' investment rating. The revised target price of 5.7 million won is based on the projected 2027 book value per share (BPS) and applies a target price-to-book ratio (PBR) of 5.2 times. As of July 31, the share price of HD Hyundai Heavy Industries stood at 4,905,000 won.

Yoo commented, "Second quarter results met market consensus. Excluding one-off costs, there is a clear trend of improvement," and added, "The performance-related costs reflected this quarter were recognized all at once for the first half, so some cost relief is possible from the second half onward." In the second quarter, revenue and operating profit reached 4.1471 trillion won and 471.5 billion won, respectively, representing increases of 8.5% and 8.7% compared to the previous quarter. Cumulative orders amounted to 8 billion dollars, achieving 63.6% of the annual target.

Specifically, he explained, "In shipbuilding, despite the impact of exchange rates, the proportion of high-priced gas carriers increased, leading to expanded revenue." He analyzed, "Profitability appears to have improved compared to the previous quarter, and this upward trend is expected to continue." He further stated, "In the offshore sector, second quarter results improved significantly due to increased revenue recognition from the Trion floating production unit (FPU) and Ruya project," diagnosing, "The increase in progress of highly profitable projects and cost reductions in materials are driving overall profitability improvement." The engine and machinery division was also evaluated to be continuously improving productivity despite high operating rates.

Yoo particularly emphasized that, from a profit perspective, HD Hyundai Heavy Industries still has ample growth potential ahead. He pointed out, "Although the proportion of gas carriers exceeds 70%, the improvement in the mix of merchant vessel types is still ongoing," and explained, "Among this quarter's revenue, 65% comes from orders placed in 2022, 31% from 2023, and 2% from 2024, indicating there is still much room for further improvement."

He continued, "Performance will continue to trend upward until the point when high-priced orders placed after 2023 are fully reflected in revenue," and analyzed, "In the offshore sector, with processes ramping up in July, visible profit growth is possible in the second half. There is also additional room for improvement in the engine business."

In addition, he viewed the renewed weakening of the dollar-won exchange rate as a positive factor. However, he added that it is necessary to monitor the trend until the end of the quarter.