[Feature Stock] Hanwha Ocean, Q1 operating profit exceeds consensus by 17.6%…Strong shipping vessel performance leads to upward target price

Hanwha Ocean, driven by the surprising first-quarter performance, has attracted attention during trading. According to the Korea Exchange, Hanwha Ocean is currently trading at 13,320 won.

Hanwha Ocean’s operating profit for the first quarter of 2025 was 441.1 billion won, exceeding broker consensus expectations (375 billion won) by 17.6%. Revenue was 3.2099 trillion won, up 2.1% year-on-year; operating profit increased by 70.6% year-on-year.

The improved performance was led by the commercial ship division. The commercial ship division achieved sales of 2.7945 trillion won and an operating profit of 502.1 billion won in the first quarter, with an operating profit margin of 18.0%. Analysts believe that the decrease in low-priced ship orders, the increased proportion of high-priced LNG ships and special ships contracted after 2024, along with process efficiency improvements from repeated construction and TOP activities, jointly contributed to the enhancement of profitability.

In contrast, the special ships and energy equipment divisions recorded operating losses of 20.8 billion won and 73.9 billion won respectively, due to delays in new orders and increased fixed costs. However, the market seems to place more emphasis on the confirmed profitability of the commercial ship division.

Brokerages have also raised their target stock prices. Hanwha Investment & Securities commented that, excluding one-time factors, the commercial ship profit margin reached 18%, suggesting that earnings estimates could be revised upward, and raised the target price to 175k won. Yuanta Securities expects the structural profit margin improvement in the commercial ship division to continue throughout the year, while SK Securities mentioned the potential for valuation multiple expansion reflecting global naval vessel business expectations.

The future stock price variables are said to be military and special ship orders. Brokers believe that whether orders for U.S. naval vessel MRO and construction projects (MASGA), KDDX, Thai frigates, and Canadian CPSP submarine projects can be secured will be a key turning point for further stock price increases. Previously, Hanwha Ocean was a shipbuilding company constructing LNG carriers, container ships, offshore platforms, and submarines, and has recently been focusing on expanding high value-added ships and military sectors.