Hanwha Ocean Expected to Expand VLCC and Warship Orders... Target Price 120,000 Won

[Financial News] IBK Securities initiated coverage on Hanwha Ocean with a 'Buy' rating and a target price of 120,000 won, forecasting that the company will expand orders in the very large crude carrier (VLCC) and warship sectors. The target price is 39.7% higher than the closing price of 85,900 won on the 14th.
In a report on the 15th, Jang Seong-ho, an analyst at IBK Securities, stated, "The reason for recommending a buy on Hanwha Ocean is that orders are expected to expand in the VLCC sector, where the company has existing strengths, and in the warship sector for the Republic of Korea Navy (ROKN)," adding, "Warship exports are also an opportunity factor to expand business areas in the future."
VLCCs are expected to see an increase in replacement orders due to the aging of existing vessels, as shipowners' investment capacity has grown due to rising freight rates. Following the outbreak of the war between the U.S. and Iran, VLCC freight rates once exceeded $380,000 per day and have maintained a high level of over $100,000 since then.
Researcher Jang analyzed, "The current average age of VLCCs is 13.5 years, the highest level since 2000," adding, "Considering that the average scrapping age of crude oil tankers is typically 20 to 25 years, the time has come for replacement orders." Currently, among VLCCs, vessels over 20 years old account for 21.1%, while those between 15 and 20 years old account for 26.0%. He projected that there is still demand for replacement orders for more than 130 vessels, and that an additional demand for replacement will occur at an annual average of 40 vessels over the next 10 years.
In the special vessel sector, attention was focused on the domestic navy's large-scale warship acquisition plans. For the Korean Next-Generation Destroyer (KDDX) project, orders for five vessels remain in place in addition to the lead ship, and the 'Jangbogo-N Project,' a Korean nuclear-powered submarine project, has also been officially announced.
Hanwha Ocean built 7 of the 13 destroyers and 13 of the 20 submarines currently operated by the Navy.
Researcher Jang stated, "The Republic of Korea Navy (ROKN), a major customer for special vessels, is pursuing the introduction of a large number of warships, so there is significant potential for domestic orders," adding, "There is no reason to limit Hanwha Ocean's special vessel capabilities to submarines."
IBK Securities projected Hanwha Ocean's revenue for this year to increase by 26.6% year-on-year to 16.1849 trillion won, and operating profit to rise by 86.6% to 2.1784 trillion won. It predicted that the operating profit margin would reach 13.5% as the revenue share of high-priced LNG carriers expands and favorable exchange rate effects are added.
It was analyzed that although merchant ship orders in the first half of the year totaled 24 vessels worth $3.8 billion, showing a slower pace than competitors, the remaining short-term delivery slots could serve as a competitive advantage in a supplier-dominated market where global shipyards have secured work for more than four years.
Researcher Jang predicted, "As the new shipbuilding price index has rebounded from its low point last March, concentrating orders in the second half of the year could ultimately be more advantageous," adding, "If orders are successfully secured in the second half, it will serve as a factor for upward revision of earnings estimates."

[email protected] Lee Jeong-hwa Reporter