HD Korea Shipbuilding & Offshore Engineering (HD KSOE) reported operating profit of 1.6451 trillion won for the second quarter of 2026, comfortably exceeding market expectations. In a research note published on 30th July, SK Securities maintained its "buy" recommendation and 12-month target price of 640,000 won.
Consolidated revenue for the quarter reached 8.9270 trillion won, up 20.2% year on year and 9.7% on the previous quarter. Operating profit of 1.6451 trillion won represented growth of 72.5% year on year and 21.3% quarter on quarter, beating the market consensus of 1.4797 trillion won by 11.1%.
The strong results were driven by simultaneous gains in the commercial shipbuilding and engine divisions. In shipbuilding, a combination of more working days, improved productivity, higher vessel prices and a favourable exchange rate all contributed. HD Hyundai Heavy Industries and HD Hyundai Samho achieved commercial shipbuilding margins of 17.8% and 22.5% respectively. HD Hyundai Heavy Industries' engine and machinery division posted an operating margin of 24.8%, lifted by a higher volume of four-stroke engine deliveries, rising average selling prices and currency tailwinds.
Order momentum remains robust. HD KSOE secured $16.38 billion in new orders in the first half of 2026 alone, equivalent to 96.2% of its full-year commercial shipbuilding target of $17.02 billion. For the second half, the company intends to be selective, focusing on higher-margin vessel types such as liquefied natural gas carriers (LNGCs), very large gas carriers (VLGCs) and very large ammonia carriers (VLACs).
SK Securities raised its full-year 2026 operating profit estimate to 6.6590 trillion won, 11.5% above its previous forecast of 5.9720 trillion won and 14.4% above the market consensus of 5.8200 trillion won. For 2027, the brokerage projects a further 26.4% rise in operating profit to 8.4140 trillion won, with the operating margin expanding to 22.2%.
This profit trajectory reflects a structural improvement following the shipbuilding industry's cyclical recovery. HD KSOE's operating margin stood at just 5.6% in 2024; if SK Securities' forecasts prove correct, it will have nearly tripled within three years. The mechanism is straightforward: a backlog of vessels contracted at today's elevated prices is progressively being recognised as revenue, amplifying profit leverage as each ship is delivered.
Longer-term growth drivers are also emerging. Surging demand for data-centre power is generating a sharp rise in enquiries for medium-speed four-stroke engines, requiring additional production capacity. The company is also developing a floating data-centre platform and is in discussions with TerraPower over the supply schedule for key components for commercial small modular reactors (SMRs). It has received approval in principle (AIP) from multiple classification societies for SMR-powered vessel designs.
The 640,000-won target price is derived by applying a target price-to-book ratio of 2.0 times to an estimated book value per share of 322,421 won for 2028. Based on the closing price of 335,000 won on 29th July, the implied upside is 91.0%. The stock currently trades around 30% below its 52-week high of 479,500 won, suggesting that the share price has not yet fully reflected the pace of earnings improvement.
Several risks warrant attention, however. Exchange-rate volatility cuts both ways: a sustained appreciation of the won could partially offset the benefit of higher vessel prices. Having fulfilled more than 96% of its annual order target in just six months, the company is likely to announce markedly fewer new contracts in the second half, which may disappoint investors accustomed to a steady flow of order news. The SMR and floating data-centre businesses carry meaningful medium-to-long-term potential, but their commercialisation timelines and eventual scale remain uncertain.
Notably, the consensus operating profit estimates of other brokerages remain more than 14% below SK Securities' own forecasts, indicating that the broader analyst community has yet to complete its upward revisions. Should other institutions follow suit, the resulting earnings upgrades could provide a further catalyst for the share price.