SK Securities lowered its target price for Hanwha Ocean (042660) from 175,000 won to 134,000 won on the 11th, reflecting the failed Canadian submarine project (CPSP) contract. The downward revision stems from the loss of the CPSP order, which had been a key component of the company's defense segment expectations. Analyst Han Seung-han emphasized that securing offshore plant and global naval contracts in the second half will be critical for the shipbuilder's stock performance.
SK Securities Forecasts Hanwha Ocean Q2 Earnings at 516.7 Billion Won Operating Profit
SK Securities projects Hanwha Ocean will report consolidated Q2 revenue of 3.4677 trillion won and operating profit of 516.7 billion won, meeting market expectations. Analyst Han stated that profitability improvements in the commercial vessel segment and reduced losses in the offshore division will drive company-wide profit growth. Contributing factors include increased delivery volumes from higher working days and improved productivity, cost reductions, a higher proportion of high-priced vessel construction, and favorable exchange rate movements. Han noted that the earnings improvement trend will continue as the proportion of high-priced vessels ordered in 2024-2025 increases in this year's order backlog.
Offshore Plant Orders Key to Resolving Marine Segment Losses
Analyst Han identified offshore plant orders as the core variable for Hanwha Ocean's future stock price. He stated that securing offshore plant orders in the second half, including the Namibia Venus floating production storage and offloading (FPSO) project, is necessary to alleviate concerns about marine segment losses. Han added that if these orders materialize, concerns about the offshore division's performance from next year onward will also ease. The target price reduction reflects adjusted earnings estimates and valuation following the CPSP contract failure.
Global Naval Contract Pipeline Remains Strong Despite CPSP Setback
Analyst Han assessed that the global naval contract pipeline remains robust, citing opportunities in Greece, Estonia, Saudi Arabia, Morocco, Egypt, Philippines, and Chile. He stated that Hanwha Ocean demonstrated its submarine competitiveness through competition with Germany's TKMS, positioning future global naval orders as potential catalysts for stock price appreciation. Han highlighted that the US Department of Defense and Navy sent a request for information (RFI) to Korean shipbuilders for combat ship and medium-sized refueling vessel construction, making US naval projects a key focus area for the second half.
FAQ
Why did SK Securities lower Hanwha Ocean's target price to 134,000 won?
SK Securities reduced the target price from 175,000 won to 134,000 won on the 11th due to the failed Canadian submarine project (CPSP) contract, which required adjustments to earnings estimates and valuation.
What offshore plant orders are critical for Hanwha Ocean in the second half?
Analyst Han Seung-han stated that securing the Namibia Venus FPSO project and other offshore plant orders in the second half is necessary to alleviate concerns about the marine segment's losses and improve future performance outlook.
