NH Investment & Securities stated on October 27 that HD Hyundai Marine Solutions has strong growth potential in its ship and land power engine maintenance business and remains undervalued. However, reflecting the appreciation of the Korean won and rising market interest rates, the firm has lowered its target price by 9.7% to 280,000 won while maintaining a 'Buy' rating.
Research analyst Jeong Yeon-seung explained, "We have reduced our profit estimates for 2027 and 2028 by 4% and 7%, respectively, to account for the strong won, and we have also lowered our target valuation by 3% considering the rise in market interest rates."
In the third quarter, HD Hyundai Marine Solutions reported sales of 650.1 billion won, a 26.7% increase from the same period last year, while operating profit rose 2.2% to 95.7 billion won. Although the operating profit fell short of market expectations by 9.7%, excluding one-time costs of 9 billion won related to the acquisition of Goltens, it met market expectations. The decline in operating profit due to the drop in exchange rates is estimated to be around 5 to 7 billion won.
The operating profit margin for its core business, AM Solutions, and eco-friendly and digital solutions was 26.7%. However, due to valuation losses on dollar deposits held for the Goltens acquisition, net profit fell 59.1% year-on-year to 32.6 billion won.
Sales from the main AM Solutions business reached 282.7 billion won, marking a 15.7% increase year-on-year and setting a record for the seventh consecutive quarter. Sales of engine parts also rose by 14.1% to 193 billion won. The number of vessels under long-term maintenance contracts (LTSA) increased by 80, and the order backlog expanded by 21% to $590 million compared to the beginning of the year.
Future growth drivers include an increased share of high-margin dual-fuel (DF) engine sales, entry into the non-affiliated ship service market through the Goltens acquisition, and maintenance services for power engines used in data centers.
In particular, the company is pursuing long-term contracts of over seven years with Aperion for maintenance services for power engines. Revenue from this segment is expected to begin in the second half of 2029, with higher profitability anticipated compared to existing ship engine maintenance.
Jeong noted, "While the delay in securing contracts for floating storage regasification units (FSRU) is disappointing, the expansion of the ship and land engine business is ongoing," adding that the projected price-to-earnings ratio (PER) for 2027 is 18.9 times, approximately 18% lower than the average of comparable companies at 22.9 times."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.