Stock Price Up 56% in the Second Half of This Year
Ship Engine Parts Account for Over 80% of Total Sales
Supplies to Hanwha Engine, HD Hyundai Heavy Industries, and HD Hyundai Marine Engine
Expectations for the shipbuilding sector are spreading in the domestic stock market following the South Korea-U.S. summit. This positive sentiment is not only benefiting major shipbuilding companies but is also reaching their partner companies.
According to the financial investment industry on September 4, the share price of Inhwa Precision has risen by 55.73% from July 1 of this year to the previous day. During the same period, the KOSDAQ index increased by only 1.95%. On August 29, Inhwa Precision's share price reached an all-time high of 59,900 won during intraday trading. After showing some adjustment over the following two days, the stock closed higher again the previous day.
Inhwa Precision manufactures ship engine parts, metal forming machines, and metal structures. Its ship engine parts division supplies products to Hanwha Engine, HD Hyundai Heavy Industries, HD Hyundai Marine Engine, and Hyosung Heavy Industries. This division accounts for over 80% of the company's total sales. The company has established an integrated production system suitable for manufacturing ship engine parts, including welding, metal fabrication, and metal processing.
In the first half of this year, Inhwa Precision recorded consolidated sales of 53.7 billion won and operating profit of 7.1 billion won. Compared to the same period last year, sales increased by 13.6% and operating profit by 23.7%. While last year's sales declined compared to the previous year, operating profit increased. Profitability improved as the cost ratio fell. With sales increasing in the first half of this year, expectations for further growth are rising.
The continuous record highs of ship engine company stocks in the domestic stock market appear to have influenced investor sentiment toward Inhwa Precision as well. Um Kyunga, a researcher at Shin Young Securities, stated, "For shipbuilding companies to scale up, it is essential to work together with their partner companies. To increase workloads, shipyards become busier, but work outside the shipyards must also be supported." She added, "If the supply of parts or block work by partner companies is delayed, shipyards cannot even begin the final assembly process."
Alongside expectations for improved performance, shareholder-friendly policies are also contributing to enhancing shareholder value. On July 15, Inhwa Precision announced that it would cancel approximately 380,000 treasury shares. At the time, this amounted to about 10 billion won based on the share price. Inhwa Precision also decided to pay an interim dividend for the first half of the year. Shareholders registered as of September 5 will receive a cash dividend of 1,000 won per share, with the total dividend payout amounting to 9.2 billion won. The company explained that the dividend will be funded by capital reserves converted into retained earnings through capital reserve reductions in December 2023 and March this year. According to the Commercial Act and the Enforcement Decree of the Income Tax Act, dividends received from capital reserves reduced in this way are not subject to dividend income tax as they are not included in dividend income.
As of the end of the first half of this year, Inhwa Precision holds a 3.45% stake in Hanwha Engine. The value of this stake is 84.9 billion won based on book value and 129.4 billion won based on the previous day's closing price.
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