[Click eStock] Shipping Companies Likely to Extend Profit Cycles Through Business Diversification

NH Investment & Securities has raised its target price for Pan Ocean from 7,700 won to 8,300 won. The investment opinion remains a "Buy."

On October 7, research analyst Jeong Yeonseung at NH Investment & Securities stated, "Pan Ocean continues to be undervalued compared to its global peers, which is why we have raised our target price." He added, "We have revised up next year's operating profit projection, reflecting the strong market conditions for tankers and product carriers, as well as long-term charter contracts for very large crude carriers (VLCCs). Furthermore, the upward movement of global shipping stocks prompted us to increase the target price-to-book ratio (PBR) to 0.75 times."

Jeong said, "Next year, the tanker division is expected to drive profit growth by accounting for 34% of total operating profit." He added, "Pan Ocean has carried out capital expenditures (CAPEX) to expand its tanker business." He further noted, "Following the acquisition of 10 VLCCs from SK Shipping, Pan Ocean has been expanding its tanker fleet through orders for new product carriers and VLCC newbuilds. Next year, two additional VLCC newbuilds will be added, and the likelihood of securing long-term charter contracts is high."

Pan Ocean's sales in the third quarter of this year are expected to reach 1.97 trillion won, up 54.9% year-on-year, and its operating profit is projected to come in at 196.9 billion won, an increase of 57.3%. This is anticipated to exceed the market consensus for operating profit by 9%. Jeong commented, "Despite the decline in the won-dollar exchange rate, robust results are expected thanks to rising rates for bulk and container shipments." He also explained, "Although a temporary decline in product tanker freight rates will have an impact on the tanker division's performance in this year's third quarter, rates have rebounded since mid-last month and are expected to drive results improvement in the fourth quarter."

He forecast, "In addition to strong short-term results, the full-scale impact of VLCC long-term charters and fleet expansion from next year will increase the tanker division's contribution to profits."

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