"Endless Boom"... Shipbuilding Stocks Sailing Smoothly

Korean shipbuilders have continued their stock price uptrend this year following last year. This is interpreted as being influenced by expectations of potential collaboration with the U.S., such as naval shipbuilding, amid sustained strong performance driven by the entry into a supercycle.

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According to the Korea Exchange on the 22nd, HD Hyundai Heavy Industries closed at 251,500 KRW, up 1.84% from the previous trading day. This marks an 8.99% increase compared to the end of last year. During the same period, Samsung Heavy Industries surged 20.97%, and Hanwha Ocean rose 46.45%. These returns overwhelmingly outperformed the KOSPI's 4.94% increase.

One of the main reasons for this rise is strong earnings. According to Shinhan Investment Corp., the combined sales and operating profit of HD Hyundai Heavy Industries, HD Hyundai Mipo, HD Hyundai Heavy Industries Korea, Samsung Heavy Industries, and Hanwha Ocean in Q4 last year were 18.7 trillion KRW and 1.1806 trillion KRW, respectively. This represents increases of 25% and 346% compared to the same period the previous year.

Lee Dong-heon, a researcher at Shinhan Investment Corp., said, "Seasonal peak demand, weak Korean won, falling steel plate prices, process stabilization, and the settling of foreign labor are positive domestic and international factors," adding, "This year, comfortable earnings growth is expected due to reflected price increases and mix improvements."

Last year, Korea's ship orders totaled 10.98 million CGT (Compensated Gross Tonnage), up 9.1% from the previous year. Shipbuilding volume reached 11.27 million CGT, recording the highest growth rate (22.1%) among major countries, showing strong performance. Expectations are rising this year as HD Hyundai Heavy Industries and Samsung Heavy Industries have succeeded in securing ship orders.

The International Maritime Organization (IMO) is pushing to reduce carbon emissions by at least 20% by 2030, 60% by 2040, and achieve 'Net-Zero' by 2050. Consequently, the timing of replacing aging ships and demand for eco-friendly vessels are occurring simultaneously, sustaining order volumes.

The earnings outlook for this year is also bright. According to FnGuide, the combined expected sales and operating profit of Korea's big three shipbuilders?HD Hyundai Heavy Industries Korea, Samsung Heavy Industries, and Hanwha Ocean?are 51.0278 trillion KRW and 3.829 trillion KRW, respectively. This represents increases of 12.11% and 83.21% compared to the previous year.

Additionally, the inauguration of Donald Trump's second administration is considered a positive factor. During his presidential transition, Trump stated that "allies could be utilized for shipbuilding." This suggests that domestic shipbuilders could achieve further growth through collaboration with the U.S.

Seo Jae-ho, a researcher at DB Financial Investment, evaluated, "Domestic shipbuilders were only expecting price effects this year," adding, "In this context, a new earnings momentum has emerged with the possibility of accessing the U.S. Navy budget."

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