[Click eStock] "HD Hyundai Heavy Industries to Offset Marine Slump with Engine Machinery and Merchant Ships"

Marine deficit trend likely to continue unless one-time gains occur
Steady growth in merchant ships and engine machinery expected to offset marine sector slump

On the 7th, Korea Investment & Securities analyzed that HD Hyundai Heavy Industries would offset the marine sector's slump with its engine machinery and commercial ship divisions. The investment opinion 'Buy' and the target price of 146,000 KRW were maintained. The investment opinion 'Buy' was also maintained.

Researcher Kang Kyung-tae of Korea Investment & Securities stated, "Considering production stabilization costs and changes in heavy plate prices, the operating profit margin for commercial ships is expected to rise to 4% by the end of the year, and the engine machinery operating profit margin will consistently maintain 10%, offsetting the marine sector's slump. We have opened delivery slots until 2028 for gas carriers and secured a large pool of orders for special vessels and marine projects, making the achievement of order targets highly likely."

2024 is expected to be a period when the sales gap in the marine sector expands. Researcher Kang said, "The marine sector will only maintain the bullpen this year, and the fixed cost burden due to the sales gap will widen the deficit. The actual order backlog for the marine sector that can be realized as sales this year is estimated at about 500 million USD." He added, "Unless one-time gains like futures occur, the deficit trend in the marine sector will continue until next year."

Currently, out of five marine sector projects, three are in progress. Among these, the GCP (Myanmar Shwe) and FPSO (Brazil P-78) projects have reached about 90% completion, and the FPS (USA Shenandoah) is also in its final stages ahead of departure in the second half of this year. Two large projects exceeding 1.1 billion USD in construction costs are scheduled to start construction from the end of this year, so their contribution to sales is low.

In the fourth quarter of last year, HD Hyundai Heavy Industries reported consolidated sales of 3.4131 trillion KRW and operating profit of 138.7 billion KRW, exceeding consensus (market average forecast) by 5.3% and 64.3%, respectively. Researcher Kang said, "Although one-time costs occurred in all sectors including shipbuilding, marine/plant, and engine machinery, the reversal of a 195.4 billion KRW provision for warranty repairs related to a specific marine project offset all one-time costs. While the recurring operating profit in the marine/plant sector remained in deficit after excluding one-time gains and losses, the operating profit margin for commercial ships, which accounts for more than 60% of consolidated sales, was steadily rising, albeit slightly, at 1.7%."

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