[Click eStock] "Daewoo Shipbuilding & Marine Engineering, Order Environment Improves This Year"

Decrease in Scale Inevitable Due to Order Gap Last Year

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] As the ship order flow is expected to improve this year, an analysis suggests that investment opportunities in Daewoo Shipbuilding & Marine Engineering (DSME) will arise from the second half of the year. However, due to the order gap in the first half of last year, a decline in scale this year is also seen as inevitable. Accordingly, Daishin Securities maintained DSME's target price at 28,000 KRW and its investment rating at 'Marketperform.'

According to Daishin Securities on the 22nd, the overall ship order market is expected to improve this year. It is observed that the merchant ship sector is recovering, and the rise in oil prices has created possibilities in the offshore sector. In fact, during the corporate briefing held last January, many questions were asked about the order atmosphere by ship type to confirm the market conditions. In particular, orders for container ships, offshore wind installation vessels, and liquefied petroleum gas (LPG) carriers are expected to be abundant. Container ships currently have the best order environment among ship types, creating conditions to raise the ship price, which is the fee paid when boarding or loading cargo. Qatar's liquefied natural gas (LNG) carriers are expected to be ordered within the year. Even if the order is delayed, the overall delivery schedule may be postponed, increasing the necessity of the order. Additionally, very large crude carriers (VLCCs) are expected to see increased orders due to aging vessels and environmental regulations.

Ship prices are expected to rise significantly from the second half of the year. As shipbuilders move away from an environment where they had to accept low-price orders, prices are currently on an upward trend, but considering rising costs, further increases are necessary. Lee Dong-heon, a researcher at Daishin Securities, said, "Last year, due to slow volume acquisition by Korean shipbuilders, competition intensified, limiting the potential for price increases," and added, "We expect a full-scale price increase from the second half of this year."

However, a decline in scale appears unavoidable. It is analyzed that the order gap in the first half of last year will continue to cause a decrease in scale this year as well. DSME presented a business plan on January 26, projecting sales of 4.8 trillion KRW and orders of 7.7 billion KRW for this year. However, this figure falls significantly short of the market consensus sales forecast of 7 trillion KRW. At the end of last month, orders amounted to only 600 million USD (approximately 678 billion KRW).

Reflecting this, Daishin Securities maintained the target price at 28,000 KRW. Researcher Lee explained, "Due to insufficient orders last year and the absence of initially expected volumes, there is a shortage of volumes to be recognized as sales. However, orders are concentrated in the fourth quarter this year, so improvements are expected from next year."

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