[Click e Stock] "Daewoo Shipbuilding & Marine Engineering, Time Needed Until Recovery"

[Asia Economy Reporter Song Hwajeong] Daishin Securities on the 16th maintained its investment opinion of 'market performance' and a target price of 28,000 KRW for Daewoo Shipbuilding & Marine Engineering (DSME), forecasting that it will take time for the company to recover its earnings.

DSME recorded sales of 959.7 billion KRW and an operating loss of 19 billion KRW in the third quarter of this year. Sales decreased by 45% compared to the same period last year, and operating profit turned to a loss. Compared to market consensus, sales were 15% below expectations, while the operating loss was smaller than the consensus. Lee Dongheon, a researcher at Daishin Securities, analyzed, "Sales have continued to decline sharply due to poor orders over the past 2-3 years," adding, "This is the first time since the early 2000s that quarterly sales have fallen below 1 trillion KRW, indicating that sales have hit a bottom." He further stated, "Operating profit was affected by fixed cost burdens due to decreased sales and rising costs, but exceeded expectations due to foreign exchange effects," and added, "Ordinary losses are expected to continue until 2022."

New orders amounted to 9.2 billion USD, exceeding the annual target of 7.7 billion USD by 119%. The order backlog secured more than two years' worth of volume.

He expressed the opinion that it will take time for earnings to recover. The researcher predicted, "The annual sales forecast for DSME this year, initially presented at 4.8 trillion KRW at the beginning of the year, will fall short, significantly decreasing compared to last year's sales of 7 trillion KRW," and added, "The fixed cost burden will continue, and recovery is expected from 2023."

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