[Click eStock] "HMM, Current Stock Price Overvalued... Possibility of Oversupply"

Shinhan Investment Corp. on the 15th presented a target price of 17,500 KRW for HMM, stating that "although earnings estimates have been revised upward, the current stock price is judged to be overvalued." The previous day's closing price was 17,750 KRW. The investment rating was upgraded from Neutral to short-term Trading Buy.

On the same day, Myung Ji-woon, a researcher at Shinhan Investment Corp., said, "HMM's sales in the fourth quarter of last year were 2.0628 trillion KRW, and operating profit was 42.3 billion KRW. Sales met market expectations, but operating profit was about 20% below."

Container segment sales were 1.6874 trillion KRW, with an operating profit of 11.4 billion KRW. Freight rates rose from the end of October last year due to the peak season. Bulk segment sales were 323.3 billion KRW, with an operating profit of 37.2 billion KRW. Bulk performance supported the downside of operating profit. Researcher Myung said, "The freight rate increase due to tensions in the Middle East was not reflected in the fourth quarter results last year. The Shanghai Containerized Freight Index (SCFI) began to rise sharply from mid-December last year due to the Red Sea issue," adding, "Considering the time lag between freight rate increases and sales reflection, the impact will be seen from the first quarter results this year."

Earnings estimates for this year have been revised upward. Researcher Myung said, "The previous operating profit estimate of 135.6 billion KRW was raised more than fourfold to 722.8 billion KRW. We set a scenario where the SCFI remains at a high level until the first half of the year due to the Suez Canal detour," and added, "We assumed the SCFI would stay above 1,500 points until April to May, when many one-year freight contracts are renewed."

The concerning part is the increase in supply. Researcher Myung pointed out, "This year, new ships amounting to 10% of the fleet capacity will be delivered. The supply reduction due to the Suez Canal detour is estimated at about 10%. Although the detour situation has prolonged, the increase in deliveries is so large that oversupply may be unavoidable."

Furthermore, he added, "Although earnings estimates have been revised upward, the current stock price is overvalued. If the impact of the Suez Canal expands further, there is room to revise the valuation (stock price relative to corporate value) upward," and said, "The sale negotiations for HMM have failed, but the creditors' group will devise a mid- to long-term strategy. There are many issues to consider, such as fleet investment plans, responses to the withdrawal of Hapag-Lloyd, the world's fifth-largest shipping company, from The Alliance, and dividend policies. We need to watch where the compass points."

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