Hanwha Ocean Expects Orders for Liquefied Natural Gas (LNG) Carriers in the United States to Ramp Up Next Year

[Financial News] NH Investment & Securities said on the 22nd that "orders for LNG carriers linked to liquefied natural gas projects in the United States are expected to ramp up next year," adding that "as competition with Chinese shipbuilders for commercial vessel orders is expected to intensify, securing large-scale orders for warships and offshore plants will likely be key to improving earnings." The brokerage maintained its 'Buy' rating and target price of 126,000 won. Hanwha Ocean's closing price on the previous trading day, September 21, was 81,800 won.
Jung Yeon-seung, a researcher at NH Investment & Securities, said, "Although the pipeline for new orders of large special-purpose vessels is limited this year, submarine acquisition programs in Egypt, Greece and Middle Eastern countries remain viable over the medium to long term. Concrete order opportunities for U.S. warships and military support vessels are also expected to expand starting next year."
He added, "Cumulative orders had reached $5.94 billion by the end of last month. After securing orders for six large container ships worth approximately $1.1 billion in September, the value of commercial vessel orders alone is expected to exceed $5.5 billion. In the fourth quarter, the market is anticipating results including an FPSO for crude oil production and storage at Namibia's Venus oil field worth more than $3 billion, the final contract for one Thai warship worth 680 billion won, and additional LNG carrier orders."
Jung emphasized, "Hanwha Ocean is also preparing to enter the market for floating data centers after securing design certification. However, considering that intensifying price competition with Chinese shipbuilders is limiting the potential for further increases in commercial vessel prices, securing meaningful large-scale orders for warships and offshore plants is of the utmost importance."
NH Investment & Securities also forecast that Hanwha Ocean's earnings would hold up relatively well in the third quarter despite lower exchange rates and fewer business days. Jung said, "Third-quarter revenue and operating profit are expected to increase 16.6% and 74.3%, respectively, from the same period a year earlier, reaching 3.53 trillion won and 505.1 billion won, but they are likely to fall below the market consensus. Given that this is due to fewer business days resulting from summer vacations and the Chuseok holiday, as well as lower exchange rates, the company is still performing relatively well under these conditions."
He added, "Hanwha Ocean increased its foreign-exchange hedging in the first half of the year to prepare for falling exchange rates, so the impact of adverse currency movements on earnings is expected to be limited. However, profit could decline in the fourth quarter as the proportion of LNG carriers decreases and costs, including incentive payments, increase."
Jung noted, "Profitability is expected to improve over the medium to long term as revenue recognition accelerates for vessels secured at high prices."
[email protected] Kang Gu-gwi Reporter