Korean brokers weigh stretched shipbuilder valuations against US naval orders

A lower valuation of subsidiary stakes prompted a 15.8% target-price cut for HD Korea Shipbuilding & Offshore Engineering, despite $19.1 billion in orders over the first three quarters. Hana Securities retained its buy rating and set the target price at 480,000 won in its Oct. 29 review.

This article examines three reports on earnings, naval contracts and financing. The other two address Hanwha’s first US naval construction contract and the different funding purposes of HD group companies.

Shares of HD Hyundai Heavy Industries closed at 262,500 won in the KRX regular session on Nov. 6, 2026, down 3.14% from the previous session.

Why did the target price fall despite orders?

The earnings review counted 176 vessels worth $19.1 billion ordered at HD Korea Shipbuilding in the first three quarters. Its target-price reduction reflected a lower valuation of the company’s stakes in subsidiaries.

Third-quarter revenue fell 7.2% from the previous quarter to 8.3 trillion won, while operating profit declined 12.0% to 1.4 trillion won. The brokerage attributed the revenue decline to fewer working days and a stronger won, putting the currency impact, including subsidiaries, at about 70 billion won.

Its analysts also identified one-off costs associated with fewer working days and recognition during the quarter of 75% of estimated wage-negotiation costs. Operating profit met consensus. Shipbuilding margins weakened, while offshore, naval and engine-and-machinery operations maintained favourable trends, according to the review.

Commercial orders also featured in SK Securities’ Nov. 2 report. It recorded two very large crude carriers ordered from Hanwha Ocean by a Bermuda-based shipowner at $133.5 million each, with delivery scheduled for September 2030.

What does Hanwha’s US naval contract cover?

Hanwha Defense USA, a subsidiary of Hanwha Aerospace, will build one Medium Landing Ship (LSM) at Hanwha Philly Shipyard under a $269 million subcontract with TOTE Services. The contract includes options for three additional landing ships; those vessels are not firm orders.

In its official announcement, HDUSA described the selection as its first US Navy shipbuilding contract. Construction is scheduled to begin in the fourth quarter of 2027, with the first vessel expected to be delivered in 2030.

The award falls under TOTE’s Vessel Construction Manager agreement with the Navy. HDUSA’s construction contract is with TOTE.

According to TOTE’s Oct. 30 announcement, Hanwha was selected through a competitive process based on pricing and acceptance of subcontract terms. Contract discussions with Bollinger Shipyards and Fincantieri Marinette Marine were continuing.

The broader $2.2 billion VCM contract provides for up to eight vessels under its base contract and supports a planned 35-ship fleet. Neither figure represents vessels awarded to Hanwha.

What is the financing for?

Debt repayment was the purpose identified by Yuanta Securities in its Oct. 28 analysis of HD Hyundai’s proposed bond issue, exchangeable into shares of HD Hyundai Marine Solution.

The brokerage compared that proposal with HD Korea Shipbuilding’s earlier exchangeable-bond financing, whose stated allocation was 50% for working capital and 50% for investments in other companies. It listed greener vessels, overseas shipyards and next-generation energy among the investment areas.