NH Investment & Securities said on the 28th that the results of three large order projects within the year will be the key to Hanwha Ocean's share price. It kept a Buy rating and raised the target price to 175,000 won from 170,000 won. Hanwha Ocean's closing price in the previous session was 133,500 won.
Jeong Yeonseung, an analyst at NH Investment & Securities, said, "Thanks to productivity improvements from repeat builds and early deliveries, the merchant ship segment posted higher profitability than expected," adding, "Despite weaker plant earnings, improved profitability in the merchant ship segment led the overall results improvement."
Hanwha Ocean said in a filing the previous day that, on a consolidation basis, it was tentatively estimated to have posted first-quarter sales of 3.2099 trillion won and operating profit of 441.1 billion won this year. Sales rose 2.1% from a year earlier, and operating profit increased 70.6% in the same period. Operating profit beat the securities market consensus (average forecast) of 375 billion won.
Jeong said, "Although it will take time for earnings to improve in plants and special ships, the merchant ship performance is expected to lead companywide results again in the second quarter."
Meanwhile, Hanwha Ocean faces three large order projects within the year. First, it is competing with ThyssenKrupp Marine Systems (TKMS) of Germany for Canada's next-generation submarine program (CPSP), worth about 60 trillion won. A preferred bidder is expected to be announced at the end of the second quarter this year.
It is also competing with SBM Offshore for an order to supply a floating production, storage and offloading unit (FPSO) to be deployed in the Venus oil field development project with massive reserves led by TotalEnergies in the Orange Basin, Namibia. Lastly, it is competing with HD Hyundai Heavy Industries in the Korea Destroyer Next Generation (KDDX) program, with results expected in the third quarter.
Jeong said, "Given the higher valuation (share price level relative to results) versus competitors, some expectations for these project wins are already priced in," but added, "If the orders are won, there is further upside potential for valuation on expectations of strengthened positioning in the global special ship and plant markets and follow-on orders."