Brokerage : iM Securities
Analyst : Yongjin Byun
Investment Rating : Buy (Maintained)
Target Price : KRW 134,000 (Lowered)
Core Momentum : Record-high merchant shipbuilding earnings driven by high-price order recognition and cost savings, countered by a target price reduction to reflect near-term sentiment headwinds from the Canadian submarine outcome and delayed US naval legislation
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Buy Maintained, Target Price lowered by 19.8% to KRW 134,000 based on a reduced Target P/B multiple of 4.5x applied to 2027E BPS of KRW 29,842 (Closing Price: KRW 88,800 as of July 27, 2026; Upside potential: 50.9%)
- 2Q26 Earnings Summary: Revenue reached KRW 5.44 trillion and Operating Profit stood at KRW 736.1 billion (OPM 13.5%). Excluding ~KRW 1.5 trillion in one-off revenue from the P-79 offshore delivery, revenue was KRW 3.94 trillion and operating profit reached KRW 736.1 billion (OPM 18.7%), significantly outperforming the brokerage’s estimates (KRW 3.51 trillion revenue / KRW 199.1 billion operating profit).
- Key Forecast Financials (2025 → 2026E → 2027E → 2028E):
- Revenue: KRW 12.78 trillion → KRW 15.92 trillion → KRW 15.47 trillion → KRW 16.08 trillion
- Operating Profit: KRW 1.17 trillion → KRW 2.44 trillion → KRW 2.67 trillion → KRW 2.83 trillion
- Net Profit: KRW 1.25 trillion → KRW 1.36 trillion → KRW 1.58 trillion → KRW 1.76 trillion
- EPS: KRW 4,066 → KRW 4,426 → KRW 5,148 → KRW 5,740
- BPS: KRW 20,137 → KRW 24,620 → KRW 29,825 → KRW 35,623
- PER: 27.9x → 20.1x → 17.3x → 15.5x
- PBR: 5.6x → 3.6x → 3.0x → 2.5x
- ROE: 22.6% → 19.8% → 18.9% → 17.5%
- EV/EBITDA: 28.3x → 11.7x → 10.3x → 9.3x
🚀 2. [Market Opportunities & Business Outlook]
- Merchant Shipbuilding Outperformance: In 2Q26, the merchant division generated revenue of KRW 3.24 trillion (+16% QoQ) and operating profit of KRW 735.6 billion (OPM 22.7%). Structural profitability gains from high-price contract recognition and cost reductions drove results without significant one-offs, supplemented by a KRW 37 QoQ rise in the average USD/KRW exchange rate.
- Special Ship & Offshore Segment Headwinds: Fixed-cost burdens increased following the expansion of the special ship facility and the loss of the Canadian CPSP contract. While selected as the preferred bidder for the KDDX lead ship, structural margin limitations and cost pressures from past bidding delays remain. The EPU (Offshore) division faces an unavoidable revenue lull following the P-79 FPSO delivery, with newly bid projects requiring 1.5–2 years of engineering design prior to revenue generation.
- MASGA Momentum & US Defense Outlook: Momentum surrounding US naval cooperation (MASGA) has moderated as critical legislation, including the Naval Readiness Act, is viewed as unlikely to pass within the 119th US Congress (ending January 3, 2027). Nonetheless, pipeline opportunities such as the imminent Thai frigate tender remain intact, with US naval cooperation remaining the primary catalyst for stock performance.
📝 Editor’s Comment (Perspective)
The analyst views Hanwha Ocean as a shipbuilder displaying stellar underlying merchant profitability driven by high-price contract execution and cost cuts, but one whose valuation multiple must be adjusted downward due to the market’s heavy focus on special ship performance and near-term delays in US naval policy tailwinds. This perspective places primary importance on the valuation impact of naval contract execution and US legislative progress over structural earnings improvements in the commercial shipping segment.
To evaluate whether this investment thesis continues to materialize, key verification points include whether merchant operating margins remain near the 20% mark in 2H, contract finalization for the Thai frigate project and subsequent naval pipeline tenders, and legislative or project-level developments regarding US naval cooperation. These factors can be tracked via future quarterly earnings releases, official IR materials, regulatory filings, and periodic financial reports.
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Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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