[Click e-Stock] "No Ship to Move"... HMM, Target Price Up 30%

Daishin Securities Report..."Freight Rates in Ultra-Strong Phase"
Q3, Container Supply Growth Rate < Demand Growth Rate

[Asia Economy Reporter Minji Lee] Daishin Securities maintained its buy rating on HMM (formerly Hyundai Merchant Marine) on the 10th and raised the target price by 30.8% from the previous level to 17,000 KRW. This adjustment reflects the upward revision of operating profit estimates due to the strong container freight rates.

Ji-hwan Yang, a researcher at Daishin Securities, said, “Shipping companies such as HMM, Korea Line, and Pan Ocean showed strong stock price performance yesterday,” adding, “This reflects expectations of improved earnings following the sharp rise in the Shanghai Containerized Freight Index (SCFI) over the past weekend.” As of the 6th, the SCFI stood at 1,664.56 points, up 8.8% (134.57 points) from the previous weekend. Freight rates were strong across all routes except the South Africa route.

[Image source=Yonhap News]

The rise in container freight rates is analyzed to be due to supply shortages caused by increased container demand in the Americas and Europe. Since early Q3, solid growth in cargo volume has been observed on routes to the Americas and Europe. While the container supply growth rate this year is around 2%, the demand growth rate has exceeded this since Q3.

The container charter market is also in a super-strong phase. Container charter rates are at their highest levels since 2016. Charter rates refer to the fees paid by shipping companies to ship owners for leasing vessels. Researcher Yang explained, “Currently, it is almost impossible to charter vessels in almost all vessel types such as VLCS, NO LCS, and LCS, so most of the vessels owned by shipping companies and ship owners appear to be in operation.”

According to data from the French maritime research organization Alphaliner, the inactive fleet accounts for only 1.6% of the total, indicating a super-strong freight rate phase. The container supply-demand balance is expected to remain tight until 2022. Researcher Yang stated, “Operating profits for HMM this year and next year have been revised upward to 945.2 billion KRW and 1.4036 trillion KRW, respectively, and the target price has also been raised by 30.8% from the previous level.”

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