[Click eStock] "HMM Target Price 19,000 Won... Investment Opinion Neutral"

LS Securities on the 21st set a target price of 19,000 KRW for HMM and issued a 'Hold' investment rating.

The benefits from the global supply chain instability originating from the Red Sea are expected to continue at least until the first half of 2025, when the current long-term contracts are gradually exhausted.

Since 2022, the container shipping market has been on a downward trend, but it rebounded due to the Suez and Panama shortages (supply shortage).

Lee Jaehyuk, a researcher at LS Securities, said, "While a mid- to long-term decline in freight rates is expected after the second half of 2025, the recent favorable market conditions present an excellent opportunity to prepare for the upcoming lean period."

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He viewed the current valuation level as less burdensome since it is inferior compared to most competitors. However, he judged that the dilution effect from the perpetual bond conversion shares continuing until April next year, the structural oversupply phase in the container shipping market due to newbuilding deliveries, and the resulting concerns over a downward adjustment in the global shipping industry's overall valuation would somewhat limit the stock's upside. The researcher added, "Considering that recent geopolitical issues surrounding the Red Sea are increasing volatility in maritime freight rates and global shipping stocks, I recommend a trading approach during corrections."

HMM's consolidated operating results for the second quarter showed sales of 2.6634 trillion KRW and operating profit of 644.4 billion KRW, slightly below market consensus. The limited earnings increase compared to the market upswing was due to the renewal of long-term contracts being reflected from mid-quarter and the earnings recognition system based on sailing progress. It is expected that in the second half of 2024, with the continuation of the Red Sea shortage, the full effect of long-term contract freight rate renewals and the expansion of peak season demand will drive strong performance.

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