[Click eStock] Daewoo Shipbuilding & Marine Engineering, Growing Expectations for Profit Turnaround

Shinhan Financial Investment Report

Shinhan Financial Investment maintained its buy rating and target price of 30,000 KRW for Daewoo Shipbuilding & Marine Engineering on the 17th.

[Image source=Yonhap News]

The company's first-quarter results recorded sales of 1.4398 trillion KRW and an operating loss of 62.8 billion KRW. Sales increased by 16%, and although the operating loss narrowed, it fell short of the market expectation of an operating loss of 38.8 billion KRW.

Sales fell short of expectations due to the impact of a major accident and work stoppages. Operating profit included a reversal of 110 billion KRW from contract price changes for Qatar’s offshore project, the NOC Fixed Platform (FP), but reflected a 140 billion KRW increase in offshore order volume and social unit price hikes, as well as a 30 billion KRW recurring loss due to fixed cost burdens. Dongheon Lee, a researcher at Shinhan Financial Investment, said, “Excluding one-off items, the company is close to the break-even point, and if costs rise in the future, it will be offset by increased sales.”

The company’s order backlog is solid. With orders of 10.8 billion USD and 10.5 billion USD in 2021 and 2022 respectively, the backlog has increased to 30.3 billion USD. This represents 3.5 years of work volume, and with a full order book, the company still holds an advantage in price negotiations.

Performance is also expected to improve. The social unit price has been raised, and workforce acquisition is increasing through foreign labor. The impact of conservative advance reflection on heavy plates is expected to be minimal. Researcher Lee said, “Although performance improvement is slow, the turnaround to profitability is near. Orders this year are limited to 1 billion USD, but will accelerate in the second half following the Hanwha Group acquisition.”

The Hanwha Group acquisition is expected to be finalized at an extraordinary shareholders’ meeting on the 23rd. Approval from the Fair Trade Commission has been completed. Regarding the integration of defense affiliates, a mid- to long-term vision announcement may be made. After the acquisition, various business expansions are expected in energy and defense sectors. Lee forecasted, “The HSD Engine acquisition schedule is flexible, and upon completion, it will become a growth engine through cooperation in new technology development.”

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