[Click eStock] "Loss in Ordinary Wages Case Expected to Cost Hundreds of Billions... Korea Shipbuilding & Offshore Engineering 'Earnings Shock' Concern"

Loss in Lawsuit Related to Ordinary Wages... One-Time Cost Expected to Reach 700 Billion Won

[Asia Economy Reporter Minwoo Lee] There are forecasts that Korea Shipbuilding & Offshore Engineering (KSOE) may post significantly poor results in the fourth quarter of last year. This is because, after losing a lawsuit related to ordinary wages filed by workers, provisions amounting to several hundred billion won are expected to be reflected in the fourth quarter results.

On the 10th, KB Securities lowered KSOE's target stock price by 7.4% to 125,000 won due to this background. The closing price on the previous trading day was 100,500 won. The investment opinion 'Buy' was maintained.

The fourth quarter results of last year are expected to show consolidated sales of 4.5038 trillion won and an operating loss of 429.5 billion won. While sales are projected to increase by 26% compared to the same period last year, the deficit is expected to expand by 2.37 times. In particular, although sales are expected to exceed market consensus by 12.2%, operating profit is forecasted to shift from a surplus of 50.3 billion won to a larger deficit, raising concerns of a significant 'earnings shock' far below market expectations.

Jung Dong-ik, a researcher at KB Securities, explained, "The reflection of increased order backlog in sales has driven external growth, and the exchange rate remains strong, but provisions related to the loss in the ordinary wage lawsuit are expected to be reflected in the fourth quarter results."

In fact, KSOE's new orders last year totaled 25.01 billion dollars, including 21.05 billion dollars in shipbuilding (including special ships), 1.82 billion dollars in offshore, and 2.08 billion dollars in engine machinery. Considering that new orders in the previous year were 11.37 billion dollars, this is more than double. Accordingly, the order backlog based on sales in the shipbuilding and offshore sectors is estimated to have increased by about 10 billion dollars to 29.11 billion dollars at the end of last year from 19.23 billion dollars the previous year. This corresponds to about 25 months of work compared to the expected sales amount this year.

However, as workers lost a lawsuit claiming that some items were omitted from ordinary wages and part of their wages were unpaid, related costs are expected to reach 700 billion won, continuing the deficit. Researcher Jung said, "The company stated that it plans to set up provisions at a point when the payment amount can be reasonably estimated, but KB Securities assumed a total one-time cost of 700 billion won, including 500 billion won in operating profit and 200 billion won in pre-tax profit in the fourth quarter of last year, and reflected this in the earnings estimates."

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