[Click eStock] "HD Hanguk Joseon Haeyang, Subsidiary Value Up... Target Price Raised by 30%"

On the 19th, Korea Investment & Securities raised the target price for HD Hyundai Heavy Industries to 260,000 KRW, citing a clear long-term trend of profitability improvement and a positive revision in the valuation of its shipbuilding subsidiaries' equity. The investment rating was maintained as 'Buy.'

Researchers Kyungtae Kang and Chaemin Nam stated, "The long-term profitability improvement trend has become more evident due to the order performance in the first half of the year," adding, "As of late July, HD Hyundai Heavy Industries has already exceeded its 2024 order target."

The two researchers noted, "Comparing the cumulative order performance for July over the past three years, the results are as good as in 2022," and emphasized, "With the vessels ordered in the first half, HD Hyundai Heavy Industries and HD Hyundai Samho have mostly filled their delivery slots through 2027, and HD Hyundai Mipo through 2026. Importantly, even for the same ship types and designs, orders were placed at progressively higher prices."

They further predicted, "The consolidated operating profit, which had been driven solely by HD Hyundai Samho, will see contributions from all three companies starting in 2025, supported by the construction volume of high-priced vessels."

In particular, reflecting the upward revision of the equity value of four shipbuilding subsidiaries, the target price was raised by as much as 30% compared to the previous level. The top 'Buy' rating within the industry was also maintained.

The researchers explained, "The target price was calculated by dividing the combined equity value (17.1 trillion KRW) of four subsidiaries?HD Hyundai Heavy Industries, HD Hyundai Mipo, HD Hyundai Samho, and HD Hyundai Energy Solutions?by the number of outstanding shares," adding, "The target price was increased by adjusting the timing for applying the net asset estimate used to calculate HD Hyundai Samho's corporate value to 2027, reflecting the market capitalization increments of the shipbuilding subsidiaries."

They added, "It is time for HD Hyundai Heavy Industries, HD Hyundai Mipo, and HD Hyundai Samho?which have widened profitability gaps to an unbridgeable extent and entered a profitability normalization phase?and the capacity expansion effect of main engine production for small and medium-sized vessels due to the acquisition of STX Heavy Industries, to all be enjoyed under HD Hyundai Heavy Industries."

Meanwhile, second-quarter sales are expected to be in line with consensus. Consolidated sales for the second quarter are projected to increase by 11.5% year-on-year to 6.0784 trillion KRW, and operating profit is forecasted to rise by 258.1% to 255.2 billion KRW.

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