Daol Investment & Securities issued 'buy' ratings for HD Hyundai Marine Engine and Hanwha Engine, citing first-half order intake that approached or exceeded each company's full-year 2024 totals. The brokerage attributed the surge to rising Chinese shipbuilding market share, which generated spillover demand for Korean engine suppliers. Both stocks declined approximately 50% from April highs despite strong fundamentals, prompting analysts to call current valuations a buying opportunity.
HD Hyundai Marine Engine and Hanwha Engine Achieve Record First-Half Orders
HD Hyundai Marine Engine secured orders worth KRW 619.9 billion in the first half of the year, surpassing its full-year 2024 total of KRW 615.9 billion. The company obtained KRW 446.3 billion in contracts from Chinese shipbuilders alone, with no orders from affiliated companies. Hanwha Engine recorded first-half orders of KRW 1.4348 trillion, approaching its full-year 2024 total of KRW 1.7706 trillion. The company's China-sourced orders reached KRW 210.5 billion in the first half, compared to KRW 929.4 billion for the full year of 2024. Daol Investment & Securities stated that additional order inflows from Chinese shipbuilders are anticipated in the second half, particularly for large tankers, container ships, and LNG carriers.
Stock Prices Decline 50% from April Highs Despite Strong Order Intake
Both companies' share prices fell approximately 50% from their April peaks. Choi Kwang-sik, a researcher at Daol Investment & Securities, stated that the shipbuilding and engine sectors experienced sharp declines due to market supply-demand dynamics starting in May. Lee Jun-beom, another researcher at the firm, assessed the recent decline as excessive given the companies' fundamentals through 2028. The brokerage maintained its target price for HD Hyundai Marine Engine at KRW 144,000. It lowered Hanwha Engine's target price to KRW 91,000 from KRW 112,000, citing the need for more time to confirm the company's entry into the AI data center power generation engine market.
Daol Investment & Securities Raises 2028 Revenue Forecasts for Both Companies
Daol Investment & Securities increased its 2028 revenue projection for Hanwha Engine to KRW 2.2320 trillion from KRW 1.84 trillion. The firm raised HD Hyundai Marine Engine's 2028 revenue forecast to KRW 1.1475 trillion from KRW 1.0449 trillion. Choi Kwang-sik stated that while shipbuilding sector earnings may peak in 2026–2027 if data center and floating data center projects are delayed, engine manufacturers' peak earnings are projected for 2028–2029. He added that the engine sector offers greater investment appeal than shipbuilding, as shipbuilders' orders have reached maximum levels while engine companies continue to benefit from China's growing shipbuilding market share.
Q2 Earnings Outlook Shows Divergent Trends
Hanwha Engine's second-quarter performance is estimated at KRW 366.6 billion in revenue, KRW 51.5 billion in operating profit, and KRW 39.5 billion in net income. Revenue remained flat due to order concentration in the second quarter of the previous year, but profitability improved significantly compared to the first quarter. HD Hyundai Marine Engine is projected to report second-quarter revenue of KRW 153.5 billion, operating profit of KRW 39.7 billion, and net income of KRW 30.1 billion, continuing strong year-over-year growth following the first quarter.
FAQ
What order intake did HD Hyundai Marine Engine and Hanwha Engine achieve in the first half of the year?
HD Hyundai Marine Engine secured orders worth KRW 619.9 billion in the first half, exceeding its full-year 2024 total of KRW 615.9 billion. Hanwha Engine recorded first-half orders of KRW 1.4348 trillion, approaching its full-year 2024 total of KRW 1.7706 trillion.
Why did Daol Investment & Securities issue buy ratings for both companies despite recent stock price declines?
Daol Investment & Securities cited record order intake driven by rising Chinese shipbuilding market share and raised 2028 revenue forecasts for both companies. The brokerage assessed the approximately 50% decline from April highs as excessive given the companies' fundamentals through 2028, characterizing current valuations as a buying opportunity.
What are Daol Investment & Securities' 2028 revenue forecasts for Hanwha Engine and HD Hyundai Marine Engine?
Daol Investment & Securities raised its 2028 revenue projection for Hanwha Engine to KRW 2.2320 trillion from KRW 1.84 trillion. The firm increased HD Hyundai Marine Engine's 2028 revenue forecast to KRW 1.1475 trillion from KRW 1.0449 trillion.
