[Click eStock] HSD Engine, Fewer Ship Engine Companies than Shipyards... "Expecting Benefits"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 14,000 KRW for HSD Engine on the 30th, expecting benefits from the increase in ship contracts at domestic shipyards.

HSD Engine is a company that can significantly benefit from the current situation where domestic shipyards are increasing the number of ship contracts using LNG and LPG as propulsion fuels. There are practically only two companies, including HSD Engine, that manufacture propulsion engines to be installed on new ships ordered by shipyards. Although there are many engine builders overseas, engine manufacturing companies can only benefit from growth if the order volume and construction volume of overseas shipyards increase.

Park Muhyun, a researcher at Hana Financial Investment, explained, “Chinese and Japanese shipyards are showing signs of withdrawing from the LNG propulsion ship competition,” adding, “Since Korean shipyards choose propulsion engines produced domestically, the growth of engine manufacturing companies, which are fewer in number compared to shipyards, is expected.”

HSD Engine’s sales performance is expected to increase from 674.3 billion KRW last year to around 880 billion KRW this year. With the increase in ship orders from shipyards and the rising demand for dual-fuel propulsion engines with higher nominal prices, it is estimated that next year’s performance will approach 1 trillion KRW.

Researcher Park said, “Since there are only two engine manufacturing companies, it is very unlikely that shipyards will choose propulsion engines produced by only one specific company,” and added, “The growth in the total ship order volume and construction volume of shipyards will translate into growth for HSD Engine.”

This year, HSD Engine’s sales and operating profit are estimated to be 887.6 billion KRW and 24.9 billion KRW, respectively. Next year’s operating performance is expected to record sales of 998.9 billion KRW and operating profit of 40.8 billion KRW. Looking at ROE, it is estimated to improve from 6.28% this year to 19.02% next year.

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