[Click eStock] "HSD Engine, Clear Demand for Ship Replacement... Expecting Order Expansion"

Hana Financial Investment Report
Decrease in Number of Docked Ships Due to Vessel Replacement

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 7,000 KRW on the 20th for HSD Engine, a supplier of ship engines, citing the replacement with new ships and reflecting an increase in order volume.

According to statistics up to September this year, the total number of ships entering the Port of Singapore, the world's largest bunkering port, decreased by about 27% on average compared to last year. On the other hand, the cargo volume entering the Port of Singapore during the same period increased by 3.1% to 2.17 million GT from 2.10 million GT in the same period last year.

Park Muhyun, a researcher at Hana Financial Investment, said, "Although the number of ships freely entering and leaving the Port of Singapore decreased due to the effective ban on ships equipped with open-type scrubbers since January this year, the cargo volume slightly increased. This means that the number of operable ships has decreased, and the reduced number of ships are transporting maritime cargo with a higher fleet turnover rate."

As carbon dioxide emission regulations tighten, the possibility of operating secondhand ships is decreasing. This implies that demand for replacement with new ships may increase. Entry of ships equipped with open-type scrubbers has been effectively banned at 25 major ports worldwide, and the use of low-sulfur fuel oil causes serious defects in propulsion engines, making LNG propulsion specifications the basic choice for new ship orders.

Researcher Park explained, "Along with the trend of a strong Korean won, shipyards are concentrating their ship order volumes, so HSD Engine's ship engine order volume is expected to increase significantly with a time lag. Operating results for the third quarter are expected to be sales of 194.6 billion KRW and operating profit of 5.8 billion KRW. The operating profit margin is estimated at 3%."

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