Brokerage : DS Investment & Securities
Analyst : Daesung Kim
Investment Rating : BUY (Maintained)
Target Price : KRW 170,000 (Raised)
Core Momentum : Sustained commercial shipbuilding profitability driven by the declining share of low-margin legacy orders and TOP cost reductions, coupled with emerging growth catalysts from the US NGLS conceptual design contract and the CPSP/FPSO bidding pipeline
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY Maintained, Target Price raised to KRW 170,000 on upward revisions to earnings estimates (Current Price: KRW 133,500 as of April 27, 2026; Upside potential: 27.3%)
- 1Q26 Earnings Summary: Revenue reached KRW 3.2 trillion (+2.1% YoY) and Operating Profit stood at KRW 385.2 billion (+70.6% YoY, OPM 13.7%), demonstrating an earnings surprise driven by commercial shipbuilding profitability.
- Key Forecast Financials (2025 → 2026F → 2027F):
- Revenue: KRW 12.78 trillion → KRW 13.82 trillion → KRW 15.90 trillion
- Operating Profit: KRW 1.17 trillion → KRW 1.92 trillion → KRW 2.34 trillion
- Operating Margin (OPM): 9.1% → 13.9% → 14.7%
- Net Profit (Controlling): KRW 1.25 trillion → KRW 1.99 trillion → KRW 2.03 trillion
- EPS: KRW 4,066 → KRW 6,487 (+59.5% YoY) → KRW 6,640 (+2.4% YoY)
- PER: 27.9x → 20.6x → 20.1x
- PBR: 5.6x → 5.3x → 4.2x
- ROE: 22.6% → 28.7% → 23.4%
- EV/EBITDA: 28.4x → 20.9x → 16.9x
🚀 2. [Market Opportunities & Business Outlook]
- Merchant Vessel Margin Expansion: Despite 5 fewer working days QoQ, operating profit delivered a solid performance due to: 1) a lower mix of low-price 2022 orders (falling from 40% in 4Q25 to 20% in 1Q26), 2) tangible cost-saving impacts from the TOP (Total Operational Performance) program initiated in 2023, and 3) high LNGC revenue exposure (70% within commercial vessels). For full-year 2026, 2022 order exposure is projected to decline to 10%, while container ship exposure rises to 13%, securing solid mix improvement effects.
- Special Ship & Offshore Segment Outlook: Both units posted operating losses in 1Q26 due to fixed-cost burdens following order deferrals. In special ships, active pipelines include KDDX and Thai frigates, with the preferred bidder selection for the Canadian CPSP expected in 1H26. For offshore, multiple tenders from Petrobras and TotalEnergies are slated for 2026 (led by Brazilian FPSOs), with securing 2 or more units expected to facilitate an early operating turnaround.
- MASGA Progress in US Defense: Hanwha Ocean secured the conceptual design contract for the US Next Generation Logistics Ship (NGLS) program, securing an advantageous position for future series construction. Additional valuation re-rating potential remains intact via Medium Unmanned Surface Vessel (MUSV) pursuits and joint US naval shipbuilding opportunities via the Austal acquisition.
📝 Editor’s Comment (Perspective)
The analyst views Hanwha Ocean as a premier shipbuilder proving fundamental earnings quality improvements through legacy low-price order reduction and operational cost rationalization (TOP), while actively constructing a differentiated growth profile in North American naval defense (MASGA) following its US NGLS conceptual design contract win. This perspective prioritizes the structural earnings recovery in commercial shipbuilding and strategic positioning in the US defense supply chain over near-term fixed-cost pressures in the naval and offshore units.
To evaluate whether this investment thesis continues to materialize, key verification points include whether merchant operating margins continue to expand as 2022 legacy orders drop to 10% of revenue, the announcement of the preferred bidder for the Canadian CPSP submarine project alongside KDDX and Thai frigate contract awards, and definitive project awards for 2+ offshore FPSOs and subsequent US NGLS series build contracts. These factors can be tracked through upcoming quarterly earnings releases, official IR materials, regulatory filings, and periodic financial reports.
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