[Click eStock] "Pan Ocean, Short-term Market Rebound Expectations Weaken... Target Price Down"
On the 13th, NH Investment & Securities downgraded the target price of Pan Ocean from 6,100 KRW to 5,600 KRW, citing weakened expectations for a short-term market rebound. The investment rating was maintained at 'Buy.'
Jeong Yeonseung, a researcher at NH Investment & Securities, explained, "While maintaining the 'Buy' rating, the target price was lowered by 8% following a 19% and 22% downward revision in operating profit forecasts for this year and next year, respectively. The prolonged sluggishness in raw material demand has weakened expectations for a market rebound."
Last month, the Baltic Dry Index (BDI) for dry bulk carriers temporarily rebounded strongly due to inventory buildup but has since turned downward again. Researcher Jeong stated, "Steel production in China has reached its limits due to deteriorating profitability of steel companies, making it structurally difficult for demand for key raw materials such as iron ore to improve in the short term. However, the gradual improvement in supply-demand balance due to medium- to long-term supply constraints remains valid."
Pan Ocean's third-quarter performance this year fell short of market consensus. Revenue was 1.1116 trillion KRW, down 39.5% year-on-year, and operating profit was 79.5 billion KRW, a decrease of 64.6%. Researcher Jeong analyzed, "The bulk carrier fleet operated was 201 vessels, down 61 vessels from the previous quarter, as the operating fleet was significantly reduced to mitigate risks amid poor market conditions. The container segment has entered an operating loss phase due to the weak market."
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He also emphasized the need to confirm the resolution of uncertainties related to the acquisition of HMM. Harim Group, Pan Ocean's parent company, is currently participating in the HMM acquisition bid, and Pan Ocean is expected to play a key role as the group's only shipping company in the acquisition process. Researcher Jeong said, "Liquidity expansion will be necessary during the HMM acquisition process, which will burden Pan Ocean's financial structure. Although the stock price has price merit at historical valuation lows, it is time to confirm whether uncertainties are resolved."
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