[Edaily Reporter Kim Ju-hwan ] Amid a bull market in which the KOSPI has surged by over 40%, major shipbuilding stocks— Hanwha Ocean(042660)—have bucked the trend, plummeting to about one-third of their peak levels. Analysts say the securities industry is unanimously lowering its expectations due to a combination of factors, including poor earnings, capacity expansions by Chinese shipbuilders, stagnant ship prices, and delays in securing orders for specialty vessels.

According to the Korea Exchange on the 29th, Hanwha Ocean closed at 52,500 won during regular trading the previous day (the 28th), down 500 won (0.94%) from the previous trading day’s closing price of 53,000 won. In contrast to the KOSPI index, which has risen more than 42% this year to create a record-breaking bull market, Hanwha Ocean’s stock price has fallen by about 53% since the beginning of the year.

In particular, after soaring to 154,800 won during intraday trading on March 3—marking its year-to-date high—the stock price has been on a downward trajectory, plummeting approximately 66% in just over seven months. This means the stock price has fallen to roughly one-third of its peak value. Immediately following the earnings announcement on the 28th, a flood of sell orders pushed the price down to as low as 51,200 won during the trading session, setting a new 52-week low. The stock’s return over the past three months stands at -40.3%, and its 12-month return is -62.1%, resulting in a relative return of -72.8% compared to the KOSPI over the same period.

Even the third-quarter earnings announcement, which had been widely anticipated to trigger a stock price rebound, turned out to be a disappointment. Prior to the announcement, some in the securities industry had raised concerns that earnings might fall short of the consensus, and the actual results confirmed these market fears.

On a consolidated basis, third-quarter revenue totaled 3.4139 trillion won, and operating profit was 485.7 billion won (operating profit margin of 14.2%). Although revenue increased by 12.9% and operating profit by 67.6% compared to the same period last year, the results fell short of the market consensus (operating profit of approximately 541.5 billion won) by about 10.3%.

Due to a reduction in operating days (9 days) resulting from summer vacations and the Chuseok holiday, as well as a decline in the quarterly average exchange rate (down 79 won) caused by the sharp appreciation of the Korean won, the operating profit margin of the core merchant ship division fell from 22.7% in the previous quarter to 17.4%. The special ship division also posted an operating loss of 70.6 billion won after conservatively reflecting, in a lump sum, the increase in estimated costs for some ongoing domestic projects. The Offshore Plant (EPU) division recorded a profit of 91.4 billion won, reflecting settlement payments of approximately 50 to 60 billion won related to contract changes (change orders, or C/O) for the P-79 project—which was also contributed by Ki—as well as revenue from drillship chartering; however, this only partially offset the negative impact on overall earnings.

Consequently, out of the 15 securities firms that published Hanwha Ocean analysis reports on the 28th, as many as 13 simultaneously lowered their target stock prices. The range of target prices set by the securities industry dropped sharply from the previous 100,000–180,000 won range to between 74,000 won and 110,000 won.

The reason behind the securities industry’s unanimous decision to lower target prices lies in the unfavorable business conditions in the company’s core business and the fading growth expectations that had previously supported the stock price. This is because further increases in new ship prices are being constrained by Chinese shipbuilders’ aggressive expansion of production capacity, and global shipping companies are delaying new orders due to concerns over a short-term oversupply of liquefied natural gas (LNG) carriers. Furthermore, momentum in the specialty ship segment—including cooperation with the U.S. Navy on maintenance, repair, and overhaul (MRO) and new construction—has also been delayed due to local legislative delays.

iM Securities lowered its target price to 98,000 won, a 26.8% reduction from the previous level. Byun Yong-jin, an analyst at iM Securities, noted, “The Trump administration’s push for cooperation with overseas shipbuilders is not being backed by legislative support,” adding, “There is a high probability that relevant bills, such as the Navy Readiness Assurance Act introduced in 2025, will not pass during the current legislative session and will automatically expire.”

He added, “For the time being, we should set aside expectations for the specialty ship business—which had been Hanwha Ocean’s key strength—and view the company based on its core business, the merchant ship sector.”

DS Investment & Securities lowered its target price to 100,000 won from the previous level. Kim Dae-sung, an analyst at DS Investment & Securities, explained, “The adjustment to the applied multiple reflects both the sector-wide valuation downgrade and delays in the U.S. and overseas warship order pipeline, resulting from the application of a 20% discount rate,” and “As the merchant ship order book remains robust, with $8.5 billion in orders secured, a multiple re-rating will be entirely possible once the main contracts for overseas warships are signed and the MASGA (U.S. naval vessel MRO and construction cooperation) project gains full momentum,” he noted.

NH INVESTMENT & SECURITIES lowered its target price to 91,000 won, a 28% reduction from the previous level. Jeong Yeon-seung, an analyst at NH INVESTMENT & SECURITIES, stated, “The stock price reflects limited increases in ship prices due to aggressive capacity expansion by Chinese shipbuilders, delays in new orders caused by a short-term oversupply of LNG carriers, and weakening expectations for growth in specialty vessels,” adding, “At the current price, which corresponds to a price-to-earnings ratio (PER) of 11.4 times for 2027, the growth premium has largely disappeared.” He further explained, “At the current stock price, where growth expectations have largely faded, momentum for a rebound is expected to emerge if order wins—particularly in offshore plants and specialty vessels—are confirmed.”

HYUNDAI MOTOR SECURITIES lowered its target price from 100,000 won to 74,000 won, a 26.0% reduction. Baek Ju-ho, an analyst at HYUNDAI MOTOR SECURITIES, said, “We lowered our earnings per share (EPS) estimate due to margin adjustments in the merchant ship segment reflecting the decline in the exchange rate,” and “With expectations for specialty vessels having diminished, we anticipate that expectations for a turnaround in earnings and new orders—driven by additional orders from the pipeline, such as the Korean-designed destroyer (KDDX) and surface vessels for Thailand and Estonia, as well as new orders for energy plants (EPU)—will act as a catalyst for the stock price.”

Seo Jae-ho, an analyst at DB Securities, also lowered the target P/E ratio from 13.0x to 10.0x and reduced the target stock price to 77,000 won, reflecting concerns over the continued decline in ship prices.

However, experts believe that with all valuation premiums now erased, the current stock price is nearing the bottom, and that the key to a stock price rebound will be the materialization of future large-scale project orders. In the merchant ship segment, the proportion of high-priced orders secured in 2024–2025 is expected to rise from 80% this year to 100% starting next year, thereby supporting margins. In line with recent global energy investment trends, demand for large LNG carrier projects destined for the U.S. and scheduled for delivery in 2030 also remains robust.

Ultimately, the key lies in securing new orders for offshore plants and overseas specialty vessels. Hanwha Ocean’s chances of winning the “Venus” large-scale floating production, storage, and offloading (FPSO) project in Namibia—led by TotalEnergies—have significantly increased following a strategic pivot by SBM Offshore, a leading competitor. In the specialty vessel sector as well, securing final contracts for the pipeline of pending projects—including Thai frigates, Estonian and Greek offshore patrol vessels (OPVs), and domestic support vessels—is the key to alleviating the burden of fixed costs.

SamsungSecurities maintained its “Buy” investment rating and target price of 80,000 won. Han Young-soo, an analyst at SamsungSecurities, stated, “The valuation premium over competitors, which was previously based on expectations for the defense business and South Korea-U.S. shipbuilding cooperation, has now largely been diluted,” adding, “Even considering short-term uncertainties—such as the costs associated with the year-end labor-management negotiations and the scale of foreign exchange hedging—Hanwha Ocean’s valuation has already fallen to an attractive level.”