[Click eStock] "Hyundai Heavy Industries, Ending the Shipbuilding Industry Recession"

Expansion of Eco-Friendly Ship Demand Expected with New Environmental Regulations in 2023
NH Investment & Securities "Hyundai Heavy Industries Target Price Set at 110,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Hyundai Heavy Industries' earnings are reflecting the cost burden due to rising material prices. However, this has already been factored in, and NH Investment & Securities assesses that the domestic shipbuilding industry's downturn is entering its final phase.

On the 24th, NH Investment & Securities newly issued a 'Buy' rating and a target price of 110,000 KRW for Hyundai Heavy Industries. The previous day's closing price was 92,700 KRW.

The material cost burden reflected in Hyundai Heavy Industries' earnings is being completely resolved. Although metal prices were a burden this year, the impact of material cost increases on the entire order backlog was preemptively reflected during the second quarter. Considering future production increases and rising production costs, a return to profitability is expected next year.

The business environment is also changing. The domestic shipbuilding industry's recession is considered to be practically over. Hyundai Heavy Industries' order backlog has increased by 48% over four years, and the industry expects a labor shortage starting next year. Choi Jin-myung, a researcher at NH Investment & Securities, observed, "Considering the new environmental regulations expected to be introduced in 2023, demand for eco-friendly ships will continue to expand."

Meanwhile, positive earnings are expected next year. With tanker demand expected to recover, the projected order volume for next year is about 10 billion USD (approximately 11.88 trillion KRW). This is about 35% higher than the average from 2017 to 2020, which should be sufficient to continue the growth trend in the order backlog. The order backlog, which was about 21.6 billion USD in 2017, is predicted to rise to 31.9 billion USD by the end of this year and 37.5 billion USD in 2023.

Researcher Choi said, "Among the major ship types targeted for operation next year?large liquefied natural gas (LNG) carriers, container ships, and tankers?demand for container ships may be sluggish," but added, "Nevertheless, the 14.9% stock price decline observed this month is excessive."

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