[Click eStock] Hyundai Heavy Industries Target Price 130,000 Won

[Asia Economy Reporter Hwang Junho] Korea Investment & Securities on the 21st set the target price of Hyundai Heavy Industries at 130,000 KRW.

Korea Investment & Securities estimated a corporate value of 3 trillion KRW for the engine business and 8.5 trillion KRW for the shipbuilding/marine business, which is twice the size of competitors, to present this target price.

They analyzed that the engine division recorded a double-digit operating profit margin higher than competitors, with cumulative operating profit reaching 3.9 trillion KRW from 2007 to the third quarter of 2021. This is four times more than HSD Engine's 900 billion KRW, and they evaluated that it can produce a minimum value of 2 trillion KRW, which is four times their target market capitalization of 510 billion KRW (market cap 400 billion KRW) for HSD Engine. Additionally, considering that Hyundai Heavy Industries ranked first globally in both cycle and view, has hardly posted losses, high profitability, the spread of LNG D/F, and joint development of MAN and ammonia engines, they saw a business value of 3 trillion KRW.

In particular, shipbuilding should be valued based on performance beyond the current backlog orders, and Korea's shipbuilding industry is now operating deliveries for 2025. This corresponds to the performance for 2024-2025. Applying a target PER of 20 times to the average EPS for 2024-2025 results in a fair value of 120,000 KRW, and 135,800 KRW based on the 2025 EPS.

Researcher Choi Kwangsik of Korea Investment & Securities stated, "We initiate coverage with a target price of 130,000 KRW, calculated by applying a target PBR of 2.0 times, which is 10% higher than the 1.8 times applied to the shipbuilding sector."

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