As Donald Trump, the President-elect of the United States, is benefiting domestic shipbuilders, only Samsung Heavy Industries among the 'big three' shipbuilders—HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries—has shown particularly poor stock performance. Analysts in the securities market pointed out that the relatively low exchange gains and the absence of a defense business are behind the weak performance of Samsung Heavy Industries.
According to the Korea Exchange on the 28th, from December 2 to 27, the stock price of HD Hyundai Heavy Industries rose by 31.6%, from 220,000 won to 289,500 won, despite the chaotic domestic stock market situation. During the same period, Hanwha Ocean's stock price also increased by 5.4% (from 35,000 won to 36,900 won). However, Samsung Heavy Industries dropped by 2.7%, from 11,620 won to 11,310 won.
Since early last month, when Trump's second administration was confirmed, shipbuilders have been attracting attention as 'Trump beneficiaries.' The expectation of increased orders is largely due to projections that the re-elected Trump administration will encourage energy development in the U.S. and expand liquefied natural gas (LNG) export facilities.
Moreover, on the 19th of this month (local time), the U.S. Congress proposed a shipbuilding bill aimed at strengthening its shipbuilding industry in cooperation with allies, and in conjunction with the Indian government's expectations for collaboration on shipbuilding investment, domestic ship-related stocks showed upward momentum. Although the stock market fluctuated overall on the 27th when the National Assembly voted on the impeachment motion of Acting President Han Duck-soo, the stocks of shipbuilders remain on an upward trajectory compared to early this month.
However, among the big three, Samsung Heavy Industries seems to be receiving less upward momentum. Although the company's stock saw an upward trend since mid-month, the increase was not as significant as the other two shipbuilders. Market analysts suggest that the weaker growth expectations are the cause of Samsung Heavy Industries' underperformance.
According to the earnings consensus from financial data firm FnGuide, Samsung Heavy Industries is expected to record an operating profit of 474.7 billion won this year, an increase of 103.47% compared to the previous year. This does not even reach half of the increase in operating profit for HD Hyundai Heavy Industries (274.24%, 668.4 billion won). Hanwha Ocean is expected to turn its operating loss of 196.5 billion won into a profit of 156.7 billion won.
One of the backgrounds for the relatively weak expectations for Samsung Heavy Industries' performance is attributed to its 100% currency hedge strategy. As the majority of customers in the shipbuilding sector are overseas shipowners, contracts are denominated in U.S. dollars. Domestic shipbuilders with a high export ratio can benefit from increased sales when the won-dollar exchange rate rises.
However, Samsung Heavy Industries is hedging against risks associated with exchange rate fluctuations by selling forward exchange contracts through 16 financial institutions as part of risk management. As a result, with the won-dollar exchange rate exceeding 1,480 won (as of December 27 during trading), Samsung Heavy Industries is in a position where it cannot benefit from exchange gains, while HD Hyundai Heavy Industries and Hanwha Ocean can hedge at levels of 70-80%, resulting in larger exchange gains.
Samsung Heavy Industries' lack of a defense business is also noted as a reason for its slow stock price growth. President-elect Trump said during a conversation with the South Korean President on the 7th of last month, 'I am well aware of Korea's world-class warships and shipbuilding capabilities, and we need to cooperate closely with Korea not only in ship exports but also in the maintenance, repair, and overhaul (MRO) sector.' This has heightened interest in the U.S. Navy's MRO projects.
Currently, among large domestic shipbuilders, only HD Hyundai Heavy Industries and Hanwha Ocean are engaged in marine defense businesses. Hanwha Ocean has secured the MRO project from the U.S. Navy this year, making it the first among domestic shipbuilders. Samsung Heavy Industries, on the other hand, is primarily focusing on orders for ultra-large container ships and LNG carriers, leading to speculation that it will see less benefit related to Trump's presidency. It is known that about 65% of Samsung Heavy Industries' order backlog consists of LNG and other gas carriers.
Analysis by 변용진 from iM Securities noted, 'Samsung Heavy Industries does not engage in sectors such as special vessels and engine machinery, where competitors currently receive premiums,' adding, 'It is only showing stable performance in its main sector of merchant vessels.'
The difference in expectations is also reflected in foreign investor demand. This month, foreign investors bought a net 59.1 billion won of HD Hyundai Heavy Industries stocks but sold a net 18.1 billion won of Samsung Heavy Industries stocks. Hanwha Ocean sold at a smaller scale of 17 billion won.
Han Young-su from Samsung Securities Research Institute said, 'HD Hyundai Heavy Industries is included in the themes of engines and marine defense, showing performance differentiation compared to its competitors, while Hanwha Ocean, despite showing slightly slower performance improvement, has seen expectations for its marine defense business and new business investments reflected in its stock price.'
One researcher stated, 'Samsung Heavy Industries has a smaller physical yard compared to its competitors, and the limited number of group companies capable of creating synergy is a weakness,' but added, 'It seems to be trying to simplify revenue with a few main products like LNG carriers and container ships, while seeking to overcome these challenges through strategies like discovering local partners in China.'