What Is Needed for a Rebound in Plunging Shipbuilding Stocks [Weekend Money]

Recovery of Offshore Plant Market After a Decade of Stagnation
Orders for Power Generation Engines and Floating Data Centers

Despite improved earnings this year, shipbuilding stocks have been on a downward trend. However, there are projections that the recovery of the offshore market, the application of shipbuilding technology to the power market, and solid long-term profit outlooks could serve as momentum for a rebound in shipbuilding shares.

On July 17, Samsung Securities stated in its report "Momentum and Feasibility for the Rebound of Shipbuilding Stocks" that the global order volume for ships in the first half of this year surged by 88% year-on-year, setting a new all-time high for any first half period.

Korean major shipbuilders have already secured order backlogs equivalent to 81% of last year's annual order intake, while the newbuilding price index has clearly entered a recovery trajectory. Nevertheless, shipbuilding stocks have fallen by about 17% compared to the beginning of the year, significantly underperforming the rise of the KOSPI index, and have shown weak performance overall.

Youngsoo Han, a researcher at Samsung Securities, explained, "Despite unexpectedly strong order figures, stock prices have adjusted due to declines in overall market valuations and profit-taking. From a fundamentals perspective, the conditions for a rebound have already been met, and now is the time for momentum to attract market attention."

The report pointed to the 'recovery of the traditional offshore structure market' and the 'expansion of shipbuilding technology into the power business' as core drivers for an industry rebound. After over a decade of stagnation, the offshore plant market has entered a full-fledged recovery cycle driven by rising demand for eco-friendly gas facilities. Han emphasized, "Offshore orders will help allay market concerns about a future slowdown in the commercial ship sector, support the achievement of this year’s order targets and enhance visibility for next year’s earnings improvements."

Additionally, as bottlenecks persist in North America with power grid connection waiting periods exceeding five years, Korean shipbuilders, who can provide relatively quick delivery, are gaining attention as alternatives in the power infrastructure market—including supplying power generation engines and floating data centers (FDCs).

Han stated, "Given the high valuations of current power equipment companies, this could be a positive driver for share prices. The engine order for data centers secured by HD Hyundai Heavy Industries in April this year is proof of that." He added, "Even if these momentum factors are delayed, steady long-term profit potential is secured by favorable exchange rates and newbuilding price increases, providing strong downside support for stock prices." Han named HD Hyundai Heavy Industries—distinguished by its unmatched engine competitiveness and opportunities for business expansion—as his top pick within the sector.

This content was produced with the assistance of AI translation services.