[Click eStock] "Hanwha Ocean Achieves 18% Merchant Ship Margin...Investment Rating Buy"

Hana Securities maintained its "Buy" investment rating on Hanwha Ocean, noting that the company's merchant ship division achieved an 18% margin in the first quarter.

On April 28, Yoo Jaeseon, a research analyst at Hana Securities, stated, "Hanwha Ocean's first-quarter results exceeded market consensus. This was due to a high margin of 18.0% in the merchant ship division, achieved without any one-off factors." The target price was also maintained at 175,000 won.

Hanwha Ocean's first-quarter operating profit, released the previous day, reached 441.1 billion won, marking an increase of over 70% from the previous quarter. Yoo explained, "Profitability centered on merchant ships improved as low-priced order volume was resolved and revenue recognition from high-priced vessels accelerated. The impact from performance bonuses in the previous quarter disappeared, and external factors such as a stronger exchange rate were also positive."

The most notable aspect of the first-quarter results was the merchant ship division's margin. Yoo highlighted, "Other business divisions recorded losses due to decreased sales, but depending on future new orders or cost recovery, the burden may be alleviated. New orders in the first quarter of 2026 amounted to 2.45 billion dollars. The order backlog improved to 34.86 billion dollars compared to the previous quarter."

This performance was attributed to favorable exchange rate effects and ongoing cost reductions, both of which positively impacted margins, as well as the effect of early delivery of some ships resulting from productivity improvements. For LNG carriers, the share of first-quarter sales remained in the 50% range, representing a slight decrease from the previous quarter; however, as shipbuilding prices continue to rise, it is expected that margins will also continue to improve.

The outlook for future defense and offshore orders was cited as an area to watch. Yoo noted, "With the ongoing geopolitical conflicts in the Middle East, diversification of energy supply chains is expected. As investments in production facilities accelerate in regions such as South America and Africa, an expansion in offshore orders is anticipated."

He went on to say, "For special-purpose vessels, the Canadian submarine project (CPSP) is expected to announce its preferred bidder at the end of the first half, and selection for the domestic KDDX (Korea Destroyer Next-Generation) project is anticipated in the third quarter. If new orders are secured within the year, improved utilization rates could gradually ease the burden on profits and losses. In addition, the ongoing trend of cost reduction, combined with order performance, leaves room for earnings estimates and multiples to be reassessed."

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