[Click e-Stock] "HD Korea Shipbuilding & Offshore Engineering Attractively Valued After Share Price Decline... Target Price Cut"

KB Securities said on October 22 that the decline in HD Korea Shipbuilding & Offshore Engineering's share price had made its valuation more attractive. It lowered its target price to KRW 380,000 from KRW 500,000, while maintaining its "Buy" rating.

Jung Dong-ik, an analyst at KB Securities, explained, "We are lowering our target price by 24.0% from the previous level to reflect revisions to our earnings estimates following changes to our exchange-rate assumptions and the work stoppage at subsidiary HD Hyundai Heavy Industries, as well as a downward revision to our applied return on equity (ROE)."

HD Korea Shipbuilding & Offshore Engineering's share price has continued to decline since May, falling nearly 30% in the second half of the year so far. "The share price decline has brought its valuation down to 4.5 times next year's forecast earnings and 1.0 times book value," Jung said. "Given its solid order intake and earnings improvement that is expected to continue at least through 2028, the shares are attractively valued."

HD Korea Shipbuilding & Offshore Engineering is expected to report third-quarter revenue of KRW 8.2582 trillion, up 8.9% from a year earlier, and operating profit of KRW 1.4512 trillion, up 37.7%, both below market expectations. "The decline in exchange rates affected some unhedged revenue and earnings. We estimate that the work stoppage at HD Hyundai Heavy Industries following a serious industrial accident, which lasted a total of four days during the third quarter, also negatively affected results," Jung said.

Cumulative new orders in the first three quarters totaled $19.49 billion, including $18.49 billion for HD Hyundai Heavy Industries, $4.21 billion for HD Hyundai Samho, and $1.8 billion for HD Korea Shipbuilding & Offshore Engineering. This represented 91.4% of the full-year target of $26.83 billion, achieved ahead of schedule. "Order target achievement rates stood at 97.2% for shipbuilding and 154.8% for engines and machinery. Offshore plants lagged at 4.9%, but we expect the shortfall to be made up in the fourth quarter," Jung said. "As new orders this year have exceeded revenue, the order backlog on a revenue basis rose to $64.59 billion at the end of the third quarter from $59.07 billion at the end of last year."

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