HD Hyundai Marine Solution Posts Weak Q3 on FX, Acquisition Costs; Target Price Cut 12.1% [Click e-Stock]

Hana Securities Maintains Buy Rating

Hana Securities cut its target price for HD Hyundai Marine Solution, a specialist in ship parts and services, by 12.1% from KRW 330,000 to KRW 290,000. The adjustment reflected third-quarter results that fell short of market expectations, but the brokerage maintained its "Buy" rating. It sees 71.0% upside from the current share price of KRW 169,600.

The weak results were due to a decline in the KRW/USD exchange rate and KRW 9 billion in one-off costs related to the acquisition of Goltens. As revenue from ship fuel supply (bunkering) accounted for a larger share of sales, the operating margin fell 2.1 percentage points from the previous quarter to 14.7%. Foreign-exchange losses stemming from the weaker dollar also weighed on results, bringing pretax profit to KRW 40.7 billion, down 62.6% from the previous quarter.

However, analysts say the company's core business remains solid. "Revenue from our core businesses continues to grow at a double-digit rate, and the recurring profit margin, excluding one-off factors, remains high in the upper 20% range," said Yoo Jaeseon, an analyst at Hana Securities.

AM (Aftermarket) Solution, which handles ship engine parts and maintenance, posted record revenue for the seventh consecutive quarter despite the stronger won. Revenue from an Ecuador onshore power generation project was recognized steadily, while initial spare-parts supplies increased as deliveries of new vessels rose. The operating margin for core businesses remained stable at 26.7%.

Revenue from Eco-friendly Solutions declined as construction schedules for FSRUs (floating storage and regasification units) were delayed, but the results are expected to be concentrated in the fourth quarter. Inquiries for recovery and repair contracts are also increasing as more vessels are hit amid worsening tensions in the Middle East. Revenue from Digital Solutions slowed as vessel deliveries fell due to changes in the number of shipyard working days.

Hana Securities forecast revenue of KRW 2.5071 trillion and operating profit of KRW 398.1 billion for 2026. Operating profit would be up 13.7% from the previous year. Operating profit for 2027 is projected to rise 19.6% to KRW 476.1 billion. Fourth-quarter operating profit was estimated at KRW 111.4 billion.

The brokerage expects AM service revenue to continue growing. It said the number of vessels covered by long-term service agreements (LTSAs) is increasing, while the growing share of dual-fuel engines, expanded engine production capacity at group affiliates, and expansion into data center-related markets are also supporting growth. It also expects new retrofit demand to emerge for floating data centers, as well as for FSRUs used for fuel supply and power-generation barges and vessels used for electricity supply.

"This is a period in which new business opportunities could expand," Yoo said, adding, "We can also expect to secure synergies from the Goltens acquisition over the long term."

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