Shinhan Investment Corp. maintained a 'Buy' rating on Sejin Heavy Industries but lowered its target price from 22,000 won to 18,500 won, a decrease of 15.9%. Despite Sejin Heavy Industries achieving record profitability due to an increased share of high-margin LPG tank sales, the firm adopted a conservative outlook, leading to the target price adjustment.
Lee Dong-heon, an analyst at Shinhan Investment, noted, "The operating profit margin for the first half of the year reached a record high of 18.8%. While some sales were deferred, the significant increase in operating profit was driven by an improved mix of high-margin LPG tanks."
Although the company has secured all LPG tank orders from HD Hyundai Shipbuilding, reducing uncertainty in orders, the outlook for profit improvement is heavily reliant on price adjustments and product mix enhancements rather than increased production volume. This warranted the application of a discount rate. Potential risks include a decrease in shipbuilding orders, quarterly performance volatility, and initial costs from Sejin Vietnam.
For the first half of this year, Sejin Heavy Industries reported sales of 180.7 billion won, an 8.1% decrease compared to the same period last year, while operating profit rose by 27.8% to 34 billion won. The operating profit margin reached a record high of 18.8%.
In particular, the second quarter saw operating profit soar to 20.4 billion won, a 131.8% increase year-on-year, with the operating profit margin hitting a quarterly high of 21.8%. The increase in profit despite a decline in sales was attributed to a higher contribution from the profitable LPG tank sales.
The analyst projected that tank shipments will be concentrated in the second half of the year, especially in the third quarter, forecasting total sales of 415.1 billion won and operating profit of 82.7 billion won for the year.
* This article has been translated by AI.
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