iM Securities reported on July 10 that Pan Ocean is expected to continue its strong performance this year due to favorable bulk and tanker freight rates. As a result, the firm raised its target price from 7,000 won to 8,000 won while maintaining a 'buy' rating.
Bae Se-ho, a researcher at iM Securities, stated, "With the recent strength in bulk and tanker freight rates, we anticipate strong results for the second quarter. The stable performance based on long-term contracts and the expansion of the tanker business will positively impact the company's long-term value."
iM Securities forecasts that Pan Ocean's consolidated revenue and operating profit for the second quarter will reach 1.5 trillion won and 159 billion won, respectively. The operating profit is expected to increase by 29.2% compared to the same period last year, surpassing market consensus by about 9%. Bae explained, "The rise in the won-dollar exchange rate, along with the strong performance in bulk and tanker freight rates, will drive improvements in results."
The firm anticipates that rising freight rates will support performance. Bae noted, "The average Baltic Dry Index (BDI) has significantly increased compared to the same period last year, driven by a rise in iron ore shipments and the commencement of exports from the Simandou iron ore project in Guinea, which has led to soaring freight rates."
The tanker segment is also expected to reflect the benefits of rising freight rates. Bae remarked, "Pan Ocean's MR tanker rates, exposed to the spot market, have surged significantly due to the impact of the Middle East conflict, leading to substantial improvements in the tanker segment's performance."
The expansion of the tanker business is also viewed positively. In February, Pan Ocean acquired long-term transportation contracts for 10 very large crude carriers (VLCCs) from SK Shipping. The company is set to receive three vessels this year, with the remaining seven scheduled for delivery later in the year.
Bae acknowledged that while short-term profitability may decline due to increased intangible assets and depreciation costs, the acquisition is considered successful given the rise in second-hand ship prices and vessel values. He added, "With additional VLCC orders and securing long-term transportation contracts, the contribution of the tanker segment to profits is expected to increase in the future."
* This article has been translated by AI.
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