[Click e-Stock] "HD Hyundai Heavy Industries: Capacity Expansion and Vessel Diversification"

Daishin Securities announced on the 28th that it has raised its target price for HD Hyundai Heavy Industries from 550,000 won to 660,000 won, citing expectations for improved net profit through production and supply chain synergies from its merger with HD Hyundai Mipo, as well as increased market share through economies of scale. The investment opinion remains 'Buy'.

Previously, both HD Hyundai Heavy Industries and HD Hyundai Mipo held board meetings the previous day and made a surprise decision to merge. New shares of the surviving company, HD Hyundai Heavy Industries, will be issued to the shareholders of HD Hyundai Mipo. This move is seen as an effort to focus on expanding U.S. military shipbuilding projects, at a time when the United States continues to court Korean shipbuilders. After the business restructuring, HD Hyundai Heavy Industries has set a sales target of 37 trillion won for 2030.

Lee Jinee, a researcher at Daishin Securities, explained, "This merger is a strategic business restructuring to respond to the rapidly changing shipbuilding industry and to meet domestic and overseas demand for new naval ships and overseas maintenance, repair, and operations (MRO) services." She added, "The main uses of the 150 billion dollars to be procured through the Korea-U.S. shipbuilding cooperation project MASGA (Make American Shipbuilding Great Again) include: ▲ construction of new shipyards in the United States ▲ expansion of new U.S. Navy shipbuilding and MRO projects ▲ transfer of shipbuilding technology and workforce training in the U.S. ▲ reconstruction of the equipment supply chain."

She identified potential business opportunities in the U.S. as follows: ▲ Strategic Merchant Fleet: at least 30 vessels by 2030 in accordance with the SHIPS Act (Shipyard Investment Act) ▲ Security Merchant Fleet: about 20 vessels that can be used as merchant ships in peacetime and converted for military supplies and fuel transport in wartime ▲ Ready Reserve Fleet: plans to order 10 Pure Car and Truck Carriers (PCTC) as a reserve fleet for transporting strategic materials.

Regarding the defense business sales target of 7 trillion won, she said, "This estimate takes into account the opening of Hyundai Heavy Industries' fourth and fifth docks," and added, "Even if the docks are allocated to defense projects, shipbuilding division sales will be maintained, as additional construction of special-purpose vessels such as icebreakers has been considered." She further noted, "The actual building capacity of Mipo is 70 vessels per year, and with only 45 vessels being built recently, there is ample room for expansion."