Hyundai Heavy Industries (009540.KS): Improving sector fundamentals
- For 2017, we forecast HHI to report revenue of KRW17.7tn and operating profit of KRW604.3bn (3.4%
operating margin) on an ROE of 3.9%. The commercial ship and offshore divisions are likely to post low
single-digit operating margins but engine profitability is likely to be handsome. We also find it positive
that the order backlog for rigs is now depleted.
- Order momentum is gaining steam, especially for VLCCs. Until May, the company’s three consolidated
subsidiaries won USD3.8bn worth of orders. It appears that sector fundamentals have bottomed out. We
also note that the shipbuilder has secured new orders for 28 100K-tonne tankers in May YTD which
represents 67% of worldwide orders, a testament to its competitiveness in the field.
Hyundai Heavy Industries is engaged in the businesses of shipbuilding, offshore and engineering, engines and machinery, electro electric systems, industrial plant and engineering, and construction equipment. Co.'s shipbuilding division builds bulk carriers, crude oil carriers and liquefied petroleum gas carriers. Co.'s offshore and engineering division includes building oil- and gas-producing facilities. Co.'s engine and machinery division manufactures industrial machinery and turbines. Co.'s electro electric systems division manufactures gas insulated switchgears and transformers. Co.'s construction equipment division manufactures excavators, wheel loaders and forklifts.
Hyundai Motor Investment & Securities is the investment banking arm of the Hyundai Motor Group. The company offers stock brokerage and advisory services; derivative products brokerage and advisory services; wrap account portfolio management services; and VIP wealth management and tax planning, institutional equities, derivatives, and futures brokerage services, as well as sells investment and institutional products. It also provides equity offering, ABS, real estate PF and real estate PF securitization, offshore SOC, structured financing, asset securitization, real estate sales, IPO advisory, and private equity fund and fund management services; and CMA/RP portfolio management and fixed income based investments, as well as involved in the issuance, management, and brokerage of OTC derivatives. In addition, the company offers research services, including macro economic forecasts and stock market outlook, industry overviews and forecasts, fixed income strategies, corporate credit analysis, and valuation analysis. Further, it offers a range of retirement and pension services for individuals and corporate members; portfolios and asset allocation consulting and marketing services; proposing retirement pension plans; contract and payment management services; pension plan advisory and actuarial services; and system development and implementation services, as well as operates call centers for retirement pension services, etc.
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