Sangsangin Securities has upgraded its investment rating for HMM from 'Hold' to 'Buy,' citing stronger-than-expected container market conditions that are expected to boost earnings. The target price was also raised from 22,000 won to 26,000 won.
Lee Seo-yeon, a researcher at Sangsangin Securities, stated on October 29, "The earnings leverage effect from the stronger-than-expected container market is likely to result in third-quarter earnings exceeding market expectations," adding, "We have revised our earnings estimates upward to reflect the favorable market conditions and incorporated the expanded valuations of global peers into our target multiples."
Sangsangin Securities forecasts HMM's consolidated revenue for the third quarter to reach 3.83 trillion won, with an operating profit of 948.6 billion won, representing increases of 42% and 220%, respectively, compared to the same period last year. The operating profit margin is expected to be 24.8%.
The key driver of this earnings improvement is the container business. For the third quarter, revenue from the container segment is projected to be 3.33 trillion won, with an operating profit of 876 billion won, marking increases of 43% and 205% year-on-year. The operating profit margin is expected to reach 26.2%.
Strong freight rates have also supported the earnings. The average Shanghai Container Freight Index (SCFI) for the third quarter is expected to be 3,407 points, up 130% year-on-year and 46% from the previous quarter. Analysts attribute this to increased cargo volumes to the U.S. and port congestion in China due to typhoons, leading to supply shortages.
Looking ahead to the fourth quarter, strong performance is anticipated to continue. With the SCFI rising to around 3,600 points in October, the prolonged impact of war and climate change on canal bottlenecks and port congestion is likely to support freight rates. Sangsangin Securities expects HMM's operating profit for the fourth quarter to increase by 186% year-on-year to 908.6 billion won.
Lee noted, "While we do not expect the same rate of freight increases as in the third quarter, the likelihood of prolonged canal bottlenecks and port congestion due to war and climate change is high," adding, "The sustained favorable market conditions and the lag effect of freight index reflecting in earnings suggest that strong performance in the fourth quarter is already anticipated."
Lee Seo-yeon, a researcher at Sangsangin Securities, stated on October 29, "The earnings leverage effect from the stronger-than-expected container market is likely to result in third-quarter earnings exceeding market expectations," adding, "We have revised our earnings estimates upward to reflect the favorable market conditions and incorporated the expanded valuations of global peers into our target multiples."
Sangsangin Securities forecasts HMM's consolidated revenue for the third quarter to reach 3.83 trillion won, with an operating profit of 948.6 billion won, representing increases of 42% and 220%, respectively, compared to the same period last year. The operating profit margin is expected to be 24.8%.
The key driver of this earnings improvement is the container business. For the third quarter, revenue from the container segment is projected to be 3.33 trillion won, with an operating profit of 876 billion won, marking increases of 43% and 205% year-on-year. The operating profit margin is expected to reach 26.2%.
Strong freight rates have also supported the earnings. The average Shanghai Container Freight Index (SCFI) for the third quarter is expected to be 3,407 points, up 130% year-on-year and 46% from the previous quarter. Analysts attribute this to increased cargo volumes to the U.S. and port congestion in China due to typhoons, leading to supply shortages.
Looking ahead to the fourth quarter, strong performance is anticipated to continue. With the SCFI rising to around 3,600 points in October, the prolonged impact of war and climate change on canal bottlenecks and port congestion is likely to support freight rates. Sangsangin Securities expects HMM's operating profit for the fourth quarter to increase by 186% year-on-year to 908.6 billion won.
Lee noted, "While we do not expect the same rate of freight increases as in the third quarter, the likelihood of prolonged canal bottlenecks and port congestion due to war and climate change is high," adding, "The sustained favorable market conditions and the lag effect of freight index reflecting in earnings suggest that strong performance in the fourth quarter is already anticipated."
* This article has been translated by AI.
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