[Click e-Stock] "HD Hyundai Marine Engine Clearly Oversold... Over 70% Upside Potential"

Mirae Asset Securities initiated coverage on HD Hyundai Marine Engine on September 29, assigning a 'Buy' rating and a target price of 85,000 won, stating that the stock is in a clearly oversold territory with an upside potential exceeding 70%.

Joohee Kim, analyst at Mirae Asset Securities, explained, "We applied a target price-to-earnings ratio (PER) of 14.5x to the projected controlling shareholder net profit of 200 billion won for 2028. Though we have factored in the steep correction since June, the upside potential still exceeds 70%." She added, "The current share price is in a clearly oversold zone. There has been no meaningful deterioration in fundamentals, and both performance and order intake remain steady. However, among global large ship engine manufacturers, the decline since the beginning of the year has been the steepest."

For a re-rating (re-evaluation), it is considered necessary to expand capacity to address the turbocharger shortage, to commence mass production of gas turbine blades, and to highlight its role as a vendor for artificial intelligence data centers (AIDC). Kim commented, "It is true that we need a catalyst to recover multiples to last year's levels. Turbocharger capacity expansion, mass production of gas turbine blades, and highlighting the company as an AIDC vendor will contribute."

The company is expected to achieve solid results both in the second half of the year and in the medium to long term. This year's annual revenue is projected to reach 597.2 billion won, which is in line with the guidance HD Hyundai Marine Engine announced at the beginning of the year. Kim noted, "As scheduled in the third quarter, delivery of two engines will follow, and direct order volumes contracted with group companies in the first half of last year will start to be reflected." She emphasized, "This is the background for an optimistic recovery in the average selling price (ASP) growth rate."

In the medium to long term, dual-fuel (DF) liquefied petroleum gas (LPG) engines are expected to be a growth driver. These accounted for around 7% of second quarter sales, and the outlook for further expansion is favorable. Kim said, "In particular, the group's recent orders and the 2028-2029 order book are heavily concentrated in LPG carriers (LPGC), which is likely to strengthen the overall shortage situation."

Potential benefits from the AIDC segment are also expected to come to the fore. Kim explained, "The key to a stock re-rating in the engine sector is AIDC market entry by 4-stroke medium-speed engines, but HD Hyundai Marine Engine has been left out of this momentum, as it does not directly produce 4-stroke engines. However, since the end of 2024, the company has begun supplying turbochargers to HiMSEN engines manufactured by HD Hyundai Heavy Industries. Expansion of engine sales to group company data centers translates into increased parts sales for HD Hyundai Marine Engine."

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