Samsung Securities on the 26th analyzed that there is sufficient premium incentive even within the shipbuilding industry. Accordingly, the investment opinion remains as 'buy,' and the target stock price has been raised from the previous 490,000 won to 557,000 won, an increase of 27.5%. The closing price of HD Hyundai Heavy Industries on the previous trading day was 437,000 won.
Han Young-soo, a researcher at Samsung Securities, noted, "The stock prices in the shipbuilding sector are continuously rising, and as a result, investors are raising concerns about valuation burden and peakout of the market. However, the shipbuilding industry is still in the phase of boom, and this year, not only shipbuilding but the overall stock prices of the Korean machinery industry are rising, so there is no reason for shipbuilders to receive a discount within the sector."
He said, "Profit growth is one way to alleviate valuation burdens, and companies with high visibility of profit growth can reflect future profits in advance," adding, "HD Hyundai Heavy Industries already recorded superior profitability compared to its competitors in the first quarter, and it is expected to maintain a similar level of profitability in the second quarter."
He remarked, "The high profitability of affiliated companies with a similar order composition will also serve as evidence of long-term profitability improvement," and added, "Securing orders faster than competitors this year also enhances the visibility of future revenue estimates."
He also mentioned, "The increase in engine demand due to overseas maritime defense market entry and tightening environmental regulations is a popular theme," and added, "Indeed, competitors engaged in defense business trade at high valuations, and the business structure of HD Hyundai Heavy Industries encompasses all of this."
A researcher emphasized the financial status and dividends of HD Hyundai Heavy Industries. After converting to a net cash position last year, the net cash at the end of the first quarter increased to 1.9 trillion won, overwhelming competing shipbuilders. He said, "Additionally, they announced an explicit dividend policy and already resumed dividend payments last year, which is a difference from competitors," adding, "There are no obstacles to expanding dividends."