[Click eStock] "Hyundai Heavy Industries Holdings, Target Price Down 25% Due to Combined Oil Price and COVID-19 Adversities"

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Hyundai Heavy Industries Holdings on the 10th, citing expected declines in the performance and stock prices of its subsidiaries due to falling oil prices and the impact of the novel coronavirus (COVID-19). The target price was lowered by 25% from the previous level to 330,000 KRW.

Hyundai Heavy Industries Holdings' first-quarter 2020 earnings are expected to fall significantly short of market expectations. Ji-hwan Yang, a researcher at Daishin Securities, explained, "Due to the drop in oil prices, the main affiliate Hyundai Oilbank is expected to record a large-scale loss," adding, "The shutdown of Chinese repair shipyards caused by COVID-19 has led to a deferral effect on retrofit (parts modification) sales, and poor performance is expected from consolidated subsidiaries."

The operating loss for the first quarter is expected to be 425 billion KRW, turning to a loss compared to the same period last year. Sales are forecasted to decrease by 14% to 5.5614 trillion KRW.

The first-quarter performance of Hyundai Oilbank, which accounts for the largest portion of consolidated results, is expected to record sales of 4.3469 trillion KRW and an operating loss of 478.2 billion KRW, representing a 15% decrease in sales and a shift to losses. This is attributed to inventory valuation losses caused by the sharp drop in oil prices and a decline in complex refining margins due to COVID-19.

Hyundai Global Service's first-quarter performance this year is projected to see sales of 206.5 billion KRW and operating profit of 30.7 billion KRW, increasing by 53% and 81%, respectively. The operating profits of consolidated subsidiaries Hyundai Construction Equipment and Hyundai Electric are expected to be 21.1 billion KRW and -5.9 billion KRW, respectively.

However, as an improvement in Hyundai Oilbank's performance is expected in the second half of the year, the dividend policy is anticipated to continue. Researcher Ji-hwan Yang stated, "Despite the poor performance, we maintain a buy rating because the company is passing through the worst market conditions, is subject to a high discount rate, and a dividend yield of over 8% based on last year's standards is expected," adding, "Hyundai Global Service is expected to maintain sales of 1.2 trillion KRW and an operating profit margin in the mid-teens percentage, so dividends are likely to increase."

This content was produced with the assistance of AI translation services.