Engine Demand Eases Peak-Out Concerns... HD Hyundai Heavy Industries' New "Growth Driver" [Click eStock]

HD Hyundai Heavy Industries Continues to Secure Orders for Power Generation Engines
Supply Remains Tight... Earnings Expectations Revised Upward

HD Hyundai Heavy Industries has been alleviating concerns about a peak-out in demand for marine engines by consecutively securing orders for power generation engines. Analysts see this as the company identifying a new growth driver suited to the era of artificial intelligence (AI).

On August 11, Samsung Securities maintained its target price for HD Hyundai Heavy Industries at KRW 806,000 and reiterated its "Buy" rating. The previous day's closing price was KRW 532,000. The decision is based on the expectation that orders for power generation engines could have a positive impact on the price and valuation of marine engines.

Recently, HD Hyundai Heavy Industries publicly announced its second large-scale power generation engine order of the year. The order, amounting to $676 million (approximately KRW 959.1 billion), was placed by Covanta Energy, a U.S. energy infrastructure company. The 9.6-megawatt (MW) Himsen engine-based power generation facilities to be supplied by HD Hyundai Heavy Industries are expected to be used as a power source for local data centers.

This contract is the largest order for power generation engines in the company's history. It is about 59% larger than the power generation facility contract announced in April. Samsung Securities explained that this order represents 25% of the company's total annual order target for its engine business, and that this business division has already surpassed its annual target.

Orders for power generation engines also have a positive impact on the marine engine business. The marine engine market is already experiencing a supply shortage. As the number of cases where marine engines are utilized in the power sector increases, this supply shortage may become prolonged, which could in turn lead to higher prices for marine engines.

There is also significance from a valuation perspective. Currently, the power equipment sector trades at a higher valuation compared to the shipbuilding sector. As HD Hyundai Heavy Industries expands its presence in the power generation market, this serves as a justification for a valuation premium over competitors.

The possibility of raising long-term earnings forecasts has also been suggested. The profitability of power generation engines is estimated to surpass that of traditional marine engines. Additionally, both this project and the contract from April are scheduled for delivery by 2030. Samsung Securities researcher Han Youngsoo commented, "HD Hyundai Heavy Industries is in a situation where it must either significantly raise engine prices for deliveries scheduled between 2029 and 2030, or pursue capacity expansion to handle its current backlog. In both scenarios, the result is an upward revision of earnings forecasts, and continued engine orders are expected to ease worries about a peak-out in the shipbuilding industry for long-term investors."

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