"Joseon Stocks, Order Expansion... Q1 Stock Price Rise Expected"

Hyundai Mipo Dockyard Up 17% This Month
At Least 51 LNG Carriers Ordered This Year

Workers at Daewoo Shipbuilding & Marine Engineering Okpo Shipyard in Geoje are lighting up the evening darkness and focusing on finishing tasks before stern installation. The COVID-19 pandemic has been ongoing for nearly two years. Countries around the world are implementing quarantine policies to overcome it and are putting all their efforts into escaping the disaster situation. The industrial landscape changed by COVID-19 is also responding quickly. In particular, the shipbuilding business environment is expected to improve in 2022. With an increase in new orders, shipbuilders' price negotiation power has strengthened, and investment capacity for ships to comply with environmental regulations has expanded, welcoming the new year with sparks of improvement.

Geoje ? Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Minji Lee] There are opinions that shipbuilders' stock prices will begin to rise significantly in the first quarter, supported by expanded order volumes.

According to the Korea Exchange on the 9th, Hyundai Mipo Dockyard recorded a 17.71% increase to 82,400 KRW from January 3 to 7. Other companies such as Hyundai Heavy Industries (14.75%), Daewoo Shipbuilding & Marine Engineering (9.80%), Korea Shipbuilding & Offshore Engineering (6.91%), and Samsung Heavy Industries (3.52%) also showed upward trends. All outperformed the KOSPI (-1.13%) returns. The rise in stock prices is analyzed to be due to shipbuilders announcing new orders since the beginning of the year. Korea Shipbuilding & Offshore Engineering, the intermediate holding company of Hyundai Heavy Industries, secured orders for 10 vessels worth 1.67 trillion KRW, and Daewoo Shipbuilding & Marine Engineering also received orders for 2 vessels worth 500 billion KRW.

Shinhan Investment Corp. stated that attention should be paid to the good news of shipbuilders' orders coming in from the start of the year. Recovery in LNG carriers was confirmed from the fourth quarter of last year, and at least 51 vessels are scheduled to be ordered this year. Tankers are experiencing strong orders from the beginning of the year due to increased scrapping and demand recovery. Hyundai Heavy Industries has already secured orders worth 1.67 trillion KRW, achieving 9.4% of this year's merchant ship order target in the first week. Researcher Hwang Eoyeon of Shinhan Investment explained, “With still high Shanghai Containerized Freight Index (SCFI) and contract signing of deferred volumes from the fourth quarter of last year, strong orders based on LNG carriers and container ships will continue.”

The order intensity by quarter this year is predicted to be strongest in the first quarter. Researcher Hwang suggested Hyundai Heavy Industries as a promising investment among shipbuilding stocks. He explained, “In the third quarter of last year, the annual order target was achieved ahead of schedule, and from the fourth quarter, passive sales activities focusing on ship prices were continued. The deferred orders from the fourth quarter are the largest among shipbuilders, so continuous order contract signings are expected in the first quarter of next year.” He added, “Among group companies, Hyundai Mipo Dockyard is estimated to have superior profitability and order competitiveness compared to other shipbuilders.”

Concerns about wage-related lawsuit losses and the failure of corporate merger reviews, which could cause stock price declines, are already factored in. In December last year, Hyundai Heavy Industries lost a lawsuit regarding ordinary wages filed by workers. Provisions are expected to be reflected in the fourth quarter, with Korea Shipbuilding & Offshore Engineering expected to record 400 billion KRW, Hyundai Heavy Industries 300 billion KRW, and Hyundai Mipo Dockyard 100 billion KRW in provisions.

The EU's corporate merger review results between Korea Shipbuilding & Offshore Engineering and Daewoo Shipbuilding & Marine Engineering are scheduled to be announced on the 21st Korea time. Researcher Hwang Eoyeon said, “The possibility of approval is low due to LNG carrier monopoly issues,” and added, “Judging from the adjusted stock prices since last month, negative factors related to wage lawsuits and corporate merger review failures have already been priced in.”

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