KSOE reported 1Q22 (K-IFRS) consolidated revenue of KRW3.91tn (+6.1% YoY) and operating loss of KRW396.4bn (turn to red YoY; -10.1% OPM).
Both revenue and the operating loss were far below the market consensus. In fact, the loss even exceeded our estimate, which was 10x higher than the consensus.
In addition to continually low shipbuilding prices and declining revenue from production suspensions, provisions against rising steel prices and Russian bonds and costs resulting from a fatal accident added to the operating loss.
In 1Q22, one-off /gains reached /KRW67.4bn. Excluding one-offs, the operating loss would be ~KRW139.1bn.
Hyundai Heavy Industries delivers earnings shock with operating loss of KRW217.4bn
Subsidiary HHI reported 1Q22 (K-IFRS) consolidated revenue of KRW2.002tn (+0.7% YoY) and operating loss of KRW217.4bn (turn to red YoY; -10.9% OPM).
Revenue missed the consensus by 14.2%, depressed by production suspension resulting from a fatal accident. The operating loss came in 18.3x larger than the consensus because of the decline in revenue, the construction of low-priced orders and provisions.
Hyundai Mipo Dockyard reports operating loss of KRW61.8bn
Subsidiary HMD recorded 1Q22 (K-IFRS) consolidated revenue of KRW876.0bn (+27.9% YoY) and operating loss of KRW61.8bn (turn to red YoY; -7.1% OPM).
While revenue slightly beat the consensus thanks to shipbuilding volume growth and higher FX rates, OP largely missed on provisions for rising commodity prices and sanctions against Russia.
1Q22 new orders at USD8.88bn (45.7% of annual target)
KSOE reported 1Q22 new orders of USD8.88bn, including USD7.68bn for shipbuilding (+37.9% YoY) and USD1.20bn for engine and machinery (+109.1% YoY), achieving 45.7% of its USD19.45bn annual target.
HHI won USD3.29bn in orders, including shipbuilding orders of USD2.09bn (-26.3% YoY), achieving 29.0% of its annual target. HMD and Hyundai Samho Heavy Industries received orders worth USD1.52bn (+0.6% YoY) and USD4.07bn (+232.9% YoY), respectively.
Factoring in additional order intake of USD2.5bn in April, shipbuilding orders have already exceeded USD10.0bn this year.
Plans to become operating holding company in mid to long term
During the conference call, KSOE announced plans to convert to an operating holding company by reinforcing in-house businesses and expanding investments in key technologies.
KSOE aims to ramp up manufacturing capabilities for core components of equipment (moving beyond design subcontractor) and increase investments in key future /marine technologies.
KSOE disclosed its target of KRW500.0bn in business revenue within five years and KRW1.0tn in the mid to long term.
If plans are realized, KSOE’s gross undervaluation vs. /subsidiaries should narrow.
Source: Business Korea
