Heungkuk Securities on the 9th raised its target price for HD Hyundai(267250) to 330,000 won from 300,000 won, reflecting solid earnings trends across subsidiaries and a rise in subsidiary value. It maintained a "buy (BUY)" rating.
Park Jong-ryeol, an analyst at Heungkuk Securities, said, "HD Korea Shipbuilding & Offshore Engineering(009540) and HD Hyundai Oilbank are leading the increase in consolidation operating profit, while most subsidiaries, including power equipment, construction equipment, and ship services, will post solid results," adding, "on a consolidation basis in the third quarter of this year, revenue is expected to be 20.924 trillion won, up 14.8% from a year earlier, and operating profit 3.211 trillion won, up 88.6%, continuing sound operating performance from the previous quarter."
HD Korea Shipbuilding & Offshore Engineering was assessed to be driven by a higher share of high-price, high-margin projects and productivity improvements. HD Hyundai Oilbank was analyzed to be reflecting improved refining margins due to strong international oil prices and geopolitical risks, as well as inventory-related gains.
HD Hyundai Electric is delivering to high-margin projects in the Americas; HD Hyundai XiteSolution is benefiting from higher volumes and a better product mix; and HD Hyndai Marine Solution is maintaining steady profitability as the share of engines within AM increases, Park explained.
Heungkuk Securities kept its existing forecast for full-year consolidation revenue at 86.088 trillion won, up 20.8% from a year earlier, and operating profit at 13.778 trillion won, up 125.9%.
Park added, "With diversified business portfolios at subsidiaries such as shipbuilding, power equipment, construction equipment, and ship services, solid earnings momentum will be maintained on the back of expanding global demand," saying, "strength will continue, including an increase in LNG carrier orders as North American greenfield LNG production project development gains traction, structural growth in the power infrastructure market, and a recovery in the construction equipment cycle."
Park went on, "Despite the recent rebound in the share price, the discount to net asset value (NAV) is 58.0%, and on a 12-month forward (Fwd) basis, the price-earnings ratio (PER) and price-to-book ratio (PBR) are 5.9 times and 1.4 times, respectively, still undervalued," but added, "it is also time to implement shareholder returns more aggressively, including canceling treasury shares."