Daishin Securities on Monday said Hanwha Ocean’s merchant ship business is expected to drive overall profit growth, keeping its target price at 164,000 won and its “buy” rating.
In a report, Daishin analyst Lee Jin-yi said the merchant ship division is “showing operating leverage” as it repeatedly builds high-margin, high-priced vessels and improves production efficiency.
Lee said Hanwha Ocean posted first-quarter revenue of 3.2099 trillion won, up 2.1% from a year earlier, and operating profit of 441.1 billion won, up 70.6%. He said profit at the merchant ship division rose sharply “without one-off factors.”
He cited earlier deliveries from repeat-build effects and cost reductions as key drivers, adding that performance bonuses were decided to be reflected as a one-time year-end item, the same as last year.
Lee said revenue recognition is expanding in earnest for high-priced orders won since 2023, and the company is maintaining a structure in which the share of high-margin prices centered on liquefied natural gas carriers, or LNGCs, is increasing. He said LNGC revenue share in overall merchant ships may dip slightly as the first tranche of Qatar volume drops out, but profit is expected to rise.
He also said the special ship division could provide a near-term earnings cushion, with remaining change orders tied to U.S. maintenance, repair and overhaul, or MRO, work expected to be reflected in the second quarter. Over the medium term, he said fixed-cost pressure could ease if orders for the next-generation destroyer program, known as KDDX, and a Thai frigate become visible within the second to third quarter.
Lee said the key issue is whether Hanwha Ocean wins an order in the first half for Canada’s next submarine program, CPSP.
Hanwha Ocean said a day earlier, in its consolidated first-quarter filing, that the merchant ship division led earnings growth on the back of high-priced projects and LNG carrier orders.
* This article has been translated by AI.
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