[Click e-Stock] "Cape: Shipbuilding Boom and Securities Turnaround...Currently Undervalued"

On September 26, KB Securities analyzed that Cape is continuing its earnings improvement, driven by the boom in the shipbuilding industry and a turnaround in its securities division.

Cape was founded in 1983 and listed on the KOSDAQ market in 2007. For over 30 years, the company has focused on the production of a single product: cylinder liners for low-speed ship engines. As the only company in Korea with an integrated production system, Cape is currently the main supplier for the three major ship engine companies-HHI, Hanwha Engine, and Hyundai Marine Engine-securing a stable supply position in the new shipbuilding market. Recently, the company has also been expanding its supply of large-type products to China.

In the first half of this year, Cape posted consolidated sales of 288.7 billion won, up 11.2% year-on-year, and operating profit surged 87.3% to 39.1 billion won. The operating margin reached 13.5%, and net profit attributable to controlling shareholders increased by 44.3% to 15.5 billion won. Lim Sanguk, a researcher at KB Securities, stated, "The favorable business environment will continue to drive an increase in cylinder liner sales for new ships," adding, "Since 2021, Korean shipbuilders have continued to secure new orders, ensuring more than four years’ worth of volume going forward."

Cape is also expected to enjoy a mid- to long-term boom in the replacement market. Cylinder liners are high-priced consumables that must be replaced every 5 to 7 years depending on the degree of inner wall wear, and are sold at higher prices compared to those for new ships. Lim explained, "Replacement products are traded at higher prices than those for new ships due to factors such as urgent demand, inability to produce continuously due to small orders, issues with obtaining product drawings, and supply shortages."

In terms of performance, Cape has demonstrated differentiated high profitability compared to other equipment manufacturers in the industry. On a standalone basis, the company recorded operating margins of 27.9% in 2023, 24.9% in 2024, and 26% in the first half of 2025, maintaining its number one position in the cylinder liner sector. The improved performance and increased value of its subsidiary, Cape Securities, are also noteworthy.

With shareholder-friendly policies leading to a full-scale rerating of securities stocks, Lim noted, "Based on this year’s expected results, the price-to-earnings ratio for peer shipbuilding equipment companies is about 24.6 times. Considering Cape’s competitiveness and performance in the shipbuilding sector, the company is significantly undervalued."