[Market Focus] HD Korea Shipbuilding & Offshore Engineering Rises, While Mipo and Heavy Industries Fall After 'Merger'

HD Korea Shipbuilding & Offshore Engineering, the intermediate holding company for shipbuilding within the HD Hyundai Group, is showing strong performance in the early hours of trading on the domestic stock market on August 28. This is a result of the aftermath of the decision to merge its affiliates, HD Hyundai Heavy Industries and HD Hyundai Mipo. In contrast, HD Hyundai Heavy Industries and HD Hyundai Mipo, which closed higher the previous day, are now seeing their stock prices decline, showing divergent trends.

As of 9:45 a.m. on this day, the share price of HD Korea Shipbuilding & Offshore Engineering is trading at 403,000 won per share, up 9.07% from the previous session. At the same time, HD Hyundai Heavy Industries is down 3.07% at 505,000 won, and HD Hyundai Mipo is down 6.02% at 203,000 won.

This is interpreted as an effect of HD Korea Shipbuilding & Offshore Engineering, the intermediate holding company for shipbuilding under HD Hyundai, restructuring its business ahead of the launch of the Korea-U.S. shipbuilding cooperation project called the MASGA (Make American Shipbuilding Great Again) Project.

The previous day, HD Korea Shipbuilding & Offshore Engineering announced that HD Hyundai Heavy Industries would absorb HD Hyundai Mipo through a merger. As a result, the integrated HD Hyundai Heavy Industries will be launched this December. The unified HD Hyundai Heavy Industries has set a goal to achieve annual sales of 10 trillion won in the defense sector by 2035.

Aerial view of HD Hyundai Heavy Industries (top) and HD Hyundai Mipo Yard. Provided by HD Korea Shipbuilding & Offshore Engineering, Yonhap News Agency

In response, the market is seeing buying momentum driven by expectations of increased structural value for HD Korea Shipbuilding & Offshore Engineering as the intermediate holding company. Um Kyunga, a researcher at Shin Young Securities, stated, "This merger will serve as a game changer among strategies to respond to the expansion of the global defense export market and the launch of the MASGA Project," and selected HD Korea Shipbuilding & Offshore Engineering as the top pick in the shipbuilding sector. Jung Dongho, a researcher at Mirae Asset Securities, also commented, "HD Korea Shipbuilding & Offshore Engineering will become the main business entity in the U.S. by having an American subsidiary under its wing (eliminating the valuation discount), and the increased value of its stakes in Hyundai Heavy Industries and Hyundai Mipo could drive up the stock price."

However, for the companies involved in the merger, despite the positive outlook from securities firms that this restructuring could enhance business value, the growing uncertainty surrounding their corporate value is being reflected in the day's weaker performance. Since all three stocks showed strong gains the previous day when news of the merger first broke, it appears that short-term profit-taking demand is also being reflected.

This merger will proceed with HD Hyundai Heavy Industries as the surviving entity, absorbing HD Hyundai Mipo. The merger ratio has been set at 0.406 new shares of HD Hyundai Heavy Industries for each common share of HD Hyundai Mipo.