We raise our 12m TP by 2.9%, from KRW340,000 to KRW350,000 (12m fwd BVPS x 4.7x target P/B), on HHI to reflect changes to our earnings estimates, 12m fwd base period, 1y MSB yield (RFR) and beta. We maintain BUY, as our new TP has 20.3% upside potential (vs. Apr 1 closing price).
1Q25 shipbuilding/offshore new orders reached USD3.26bn (-10.2% YoY; vs. USD3.63bn last year), equivalent to 33.4% of 2025 new order guidance (USD9.75bn) presented earlier this year. This represents a slight reduction YoY because an unfavorable base but a stable trend relative to guidance. Order wins include 12 containerships, three LPG carriers and two tankers. Engine/Machinery order wins until end-Feb totaled USD1.16bn. Company-wide 1Q25 new orders are estimated at USD5.0bn, up over 10% YoY.
Brisk order wins; more than three years of workload secured
Buoyed by solid order activity, revenue-based shipbuilding/offshore order backlog as of end-Feb stood at USD27.71bn, up USD1.97bn from USD25.74bn at end-2024. With no new orders disclosed for Mar, the order backlog is estimated to have fallen by the amount of Mar revenue. However, it amounts to enough workload to last more than three years relative to the unit’s 2025E revenue (KRW12.7tn), suggesting no disruption to future earnings growth.
1Q25 preview: Earnings slightly below consensus, but quarterly profitability should continue to improve
We forecast 1Q25 K-IFRS consolidated revenue at KRW3.62tn (+21.1% YoY) and OP at KRW217.0bn (+920.5% YoY; 6.0% OPM), both slightly below the market consensus. Excluding seasonality, however, overall quarterly profitability should continue to improve, in our view, with 1Q25/2Q25/3Q25/4Q25 OPM at 6.0%/6.2%/6.6%/7.4%.
Source: Business Korea
