[Click e-Stock] "HMM, Container Shipping Rates to Keep Falling... Target Price Lowered"

Target Price Lowered by 4.5% from Previous Level

On November 14, KB Securities lowered its target price for HMM from 22,000 won to 21,000 won, citing expectations that container shipping rates will continue to decline. The investment opinion was maintained at 'Neutral'.

Kang Sungjin, a researcher at KB Securities, stated, "We have lowered the target price by 4.5% compared to the previous level," and explained, "Although HMM's operating profit for the third quarter exceeded the consensus (the average of securities firms' forecasts) and the Shanghai Containerized Freight Index (SCFI) has recently rebounded, there does not appear to be a catalyst strong enough to overturn investors' firm belief in a container ship oversupply."

In the third quarter, HMM recorded an operating profit of 296.8 billion won, down 79.7% from the same period last year. Kang analyzed, "This figure is 7.1% higher than the consensus but 21.2% lower than KB Securities' previous forecast. Excluding one-off general administrative expenses of 59.5 billion won, operating profit would have been 356.3 billion won, which is close to KB Securities' previous forecast (376.6 billion won), but it still represents a significant year-on-year decline in operating profit."

The sharp decline in operating profit was due to falling container shipping rates. Kang explained, "Due to oversupply, container shipping rates dropped by 38.5% compared to the same period last year. Of the total operating profit decline of 860 million dollars, 780 million dollars can be attributed to lower shipping rates. Meanwhile, the available slot allocation (BSA) was higher than expected, while the load factor (cargo loading rate) was lower than anticipated, resulting in container shipping profitability being slightly lower than expected."

KB Securities forecast HMM's annual operating profit for this year at 1.4028 trillion won, down 60.1% from the previous year. Kang said, "Reflecting the third quarter's operating results, we have lowered our forecast by 5.2%, while maintaining our fourth-quarter operating profit estimate at the previous level." He added, "We expect the decline in operating profit due to falling shipping rates to continue into the fourth quarter." He further stated, "We also anticipate that container shipping rates will continue to fall next year, and that HMM's operating profit in 2026 will decrease by 40% to 841.1 billion won."