Kiwoom Securities projected on October 19 that Hanwha Ocean's third-quarter performance will fall short of market expectations, emphasizing the need for new orders in the special ship and offshore sectors. The firm maintained its 'buy' rating but lowered its target price to 119,000 won.
Lee Han-gyeol, a researcher at Kiwoom Securities, estimated that Hanwha Ocean's third-quarter revenue would increase by 10.4% year-on-year to 3.3386 trillion won, while operating profit is expected to rise by 74.4% to 505.3 billion won. However, he noted that the operating profit margin is likely to be 15.1%, below market expectations.
The primary reasons for the disappointing performance include a 15% decrease in working days compared to the previous quarter and the strengthening of the Korean won. Revenue and profits from the commercial ship sector are anticipated to be weaker than expected, and losses are projected in the energy plant and special ship sectors due to fixed cost burdens.
Despite this, the increasing revenue share from high-priced vessels is expected to contribute to long-term profitability improvements. The revenue share from high-priced vessels ordered since last year is projected to rise significantly through the fourth quarter.
New orders remain robust. As of the end of September, Hanwha Ocean secured contracts for eight liquefied natural gas (LNG) carriers and 18 very large crude carriers (VLCCs), totaling 38 vessels and approximately $6.17 billion in orders. This represents a 2.2% increase compared to the same period last year.
For future performance and corporate value enhancement, new orders in the special ship and offshore sectors are deemed crucial. Hanwha Ocean was selected as the preferred bidder for a 4,000-ton patrol vessel project in Thailand in September and is pursuing a main contract worth approximately 680 billion won. Discussions are also ongoing regarding a patrol vessel project in Estonia and a floating production, storage, and offloading (FPSO) project in Namibia.
Lee stated, "The expansion of the special ship sector is expected to accelerate in the future," adding that if the construction of U.S. naval vessels overseas is permitted, Hanwha Ocean, which has local shipyards, would be in a favorable position to secure contracts.
He also noted that the target price-to-earnings ratio (PER) was adjusted from the previous 23 times to 15 times, reflecting concerns about a peak-out in the commercial ship market due to aggressive capacity expansions by Chinese shipbuilders.
* This article has been translated by AI.
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