Where has the “MASGA effect” gone? Hanwha Ocean target price cut by 25%

[Financial News] LS Securities forecast Hanwha Ocean’s third-quarter operating profit to rise 74% from a year earlier, while cutting its target price by 25%, from ₩120,000 to ₩90,000. The analysis was that falling exchange rates had lowered earnings expectations and that the upside momentum from MASGA, a Korea-U.S. shipbuilding cooperation project, had weakened. The firm maintained its “Buy” rating.
On the 14th, LS Securities researcher Lee Jae-hyeok said, “Steady LNG carrier construction volumes and the phased deployment of container ships will sustain the commercial vessel segment’s earnings-generating capacity,” while also noting that “a downward revision to earnings expectations is unavoidable due to fewer production days and the sharp drop in the won-dollar exchange rate.”
LS Securities forecast Hanwha Ocean’s consolidated third-quarter revenue at ₩3.6861 trillion and operating profit at ₩504.6 billion. These figures represent increases of 21.9% and 74.1%, respectively, from a year earlier. However, operating profit is expected to come in about 10.4% below the market forecast of ₩563.3 billion.
The commercial vessel segment is expected to maintain stable profitability. The share of high-margin vessels is holding steady as deliveries of LNG carriers ordered in 2022 proceed and construction begins on LNG carriers ordered in 2024, the firm said. It also expects construction of container ships scheduled for delivery in 2028 to ramp up in stages.
By contrast, fixed-cost burdens in the special-purpose vessel segment were cited as a factor limiting earnings growth. The segment is estimated to post an operating loss of ₩2 billion in the third quarter. The analysis was that, even if profits rise in the commercial vessel segment, it will take time for profitability in the special-purpose vessel segment to recover.
The MASGA project, which had driven Hanwha Ocean’s share-price gains, is also seen as having lost momentum. Last August, U.S. President Donald Trump signed a national security memorandum aimed at reforming naval shipbuilding, and operations at Hanwha Philly Shipyard are gradually stabilizing. However, expectations tied to the project have fallen considerably from the first half of the year.
Lee said, “The expansion of geopolitical and policy volatility stemming from the U.S.-Iran war, along with political uncertainty ahead of the U.S. midterm elections, is behind the loss of momentum related to MASGA. We expect that momentum to gradually recover as relevant laws are amended and U.S. administration-led policies to support the shipbuilding industry gather pace after the midterm elections.”
Whether U.S. policies to support the shipbuilding industry take concrete shape is seen as a factor that will determine the future course of the share price. If efforts move forward to amend the Byrnes-Tollefson Amendment, which concerns the construction of warships in the United States, and the Jones Act, which requires U.S.-built vessels, among other things, for U.S. coastal shipping, expectations for Hanwha Ocean’s expansion in the U.S. market could rise again.
Opportunities to win overseas naval vessel contracts also remain. Although missing out on Canada’s Canadian Patrol Submarine Project (CPSP) was disappointing, the firm expects global naval contract opportunities to continue this year, including Thai surface combatants and Saudi frigates.
Lee expects that, although expectations related to MASGA have weakened for now, U.S. shipbuilding support policies and overseas naval vessel contracts will help restore momentum for future share-price gains.   

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