Professional Documents
Culture Documents
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Equity Research l Korea shipbuilding
10 October 2013 46
F
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8
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Equity Research l Korea shipbuilding
10 October 2013 47
F
i
g
u
r
e
8
7
:
S
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Equity Research l Korea shipbuilding
10 October 2013 48
Appendix VI: Price trends of commercial vessels
Figure 88: Bulker new-build prices Figure 89: Tanker new-build prices
Source: Clarksons, Standard Chartered Research
Source: Clarksons, Standard Chartered Research
Figure 90: Container ship new-build prices Figure 91: Gas carrier new-build prices
Source: Clarksons, Standard Chartered Research
Source: Clarksons, Standard Chartered Research
Figure 92: Bulker second-hand prices Figure 93: Tanker second-hand prices
Source: Clarksons, Standard Chartered Research
Source: Clarksons, Standard Chartered Research
0
20
40
60
80
100
120
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
Capesize 176-180k DWT Panamax 75-77k DWT
Handymax 56-58k DWT Handysize 25-30k DWT
0
20
40
60
80
100
120
140
160
180
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
VLCC 315-320k DWT Suezmax 156-158k DWT
Aframax 113-115k DWT Panamax 73-75k DWT
Handysize 37-47k DWT
0
20
40
60
80
100
120
140
160
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
Post Panamax 8500-9100 TEU Post Panamax 6600-6800 TEU
Panamax 5100 TEU Panamax 3400-3600 TEU
Sub-Panamax 2600-2900 TEU
0
50
100
150
200
250
300
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
LPG 78-84k CBM LPG 60k CBM
LPG 22-24k CBM LNG 160k CBM
0
20
40
60
80
100
120
140
160
180
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
Capesize 180k DWT Panamax 73k DWT
Handymax 56k DWT Handysize 28-30k DWT
0
20
40
60
80
100
120
140
160
180
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
VLCC 310k DWT Suezmax 160k DWT
Aframax 105k DWT Panamax 73k DWT
Handysize 47k DWT Handysize 37k DWT
Equity Research l Korea shipbuilding
10 October 2013 49
Figure 94: Container ship second-hand prices Figure 95: Second-hand versus new-build prices
Source: Clarksons, Standard Chartered Research
Source: Clarksons, Standard Chartered Research
Figure 96: Commercial vessel new-build price trends
(USD/CGT, %) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
New-build price
Tanker 1,481 1,619 2,113 2,574 2,690 2,938 3,237 2,481 2,239 2,189 2,055 1,972 2,011 2,051
Bulk carrier 1,185 1,344 1,814 2,108 2,105 2,740 3,021 2,105 1,960 1,831 1,604 1,575 1,606 1,638
Container 1,467 1,595 1,966 2,367 2,333 2,399 2,525 1,651 1,751 1,930 1,657 1,568 1,615 1,663
LPG carrier (75k cmb) 1,950 2,011 2,440 3,012 3,054 3,062 3,129 2,670 2,381 2,426 2,365 2,340 2,410 2,482
LNG carrier (123k cmb) 1,836 1,776 2,025 2,399 2,562 2,637 2,578 2,364 2,194 2,189 2,182 2,176 2,242 2,309
Price change (YoY)
Tanker -12.3% 9.3% 30.5% 21.8% 4.5% 9.2% 10.2% -23.3% -9.8% -2.3% -6.1% -4.0% 2.0% 2.0%
Bulk carrier -5.7% 13.4% 35.0% 16.2% -0.2% 30.2% 10.3% -30.3% -6.9% -6.6% -12.4% -1.8% 2.0% 2.0%
Container -11.6% 8.7% 23.3% 20.4% -1.5% 2.9% 5.2% -34.6% 6.1% 10.2% -14.1% -5.4% 3.0% 3.0%
LPG carrier (75k cmb) -5.0% 3.1% 21.3% 23.4% 1.4% 0.3% 2.2% -14.7% -10.8% 1.9% -2.5% -1.1% 3.0% 3.0%
LNG carrier (123k cmb) -8.7% -3.3% 14.0% 18.5% 6.8% 2.9% -2.2% -8.3% -7.2% -0.2% -0.3% -0.3% 3.0% 3.0%
Source: Clarksons, Standard Chartered Research estimates
0
10
20
30
40
50
60
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
U
S
D
m
n
Panamax 3200 TEU Sub Panamax 2300 TEU
Handy 1000 TEU Feedermax 700 TEU
Feeder 300 TEU
20%
40%
60%
80%
100%
120%
140%
160%
180%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
%
VLCC Tanker 2nd hand as % of NB price
Capesize Bulker 2nd hand as % of NB price
Panamax Containership 2nd hand as % of NB price
Equity Research l Korea shipbuilding
10 October 2013 50
Daewoo Shipbuilding & Marine Engineering
A new chapter
We initiate coverage of Daewoo Shipbuilding & Marine
Engineering (DSME) with an Outperform rating.
We believe DSME is well positioned to capture some of the
USD 35bn p.a. opportunities we see for the big three
Korean shipbuilders in the commercial vessel (CV) and
offshore segments, leveraging its leadership in both areas.
The turnaround in earnings we expect from 2014 should be
a strong catalyst for the share price.
DSME is our top pick in the sector. We would view any
weakness in the share price as a buying opportunity.
n OUTPERFORM (initiating coverage)
A new chapter. We expect a strong turnaround in DSME earnings
from 2014, and forecast a 2013-15 earnings CAGR of 98.6%.
Concerns on profitability, subsidiaries and balance sheet are now
behind us, in our view. Its order backlog is shifting nicely from CV
to offshore facilities (both drilling and production platforms). CV
accounts for 31% of the backlog in 1H13 compared to 60% in
2010. We expect CV to account for 21% of backlog in 2015, with
CV business focusing on VLPP container ships (18,000+ TEU or
larger), which remain lucrative for the company.
Offshore platforms, a USD 20bn p.a. opportunity. DSME has
built a strong track record in offshore platforms, where we expect a
USD 15bn p.a. opportunity for the Korean big three. It is building
the Kanowit F-LNG for Petronas and according to local media
reports could soon win an F-LNG order in the Tamar LNG field
(from the Nobel Energy consortium). We believe the F-LNG
segment is another USD 5-6bn p.a. opportunity for DSME.
Container ships. DSME is a global leader in VLPP container
ships. It delivered its first VLPP (an 18,000 TEU vessel to Maersk)
in June 2013, and will deliver a vessel a month until end-2013. We
expect a significant learning effect to kick in. The post-Panamax
order outlook appears strong as container liners will compete for
economies of scale, and we believe the Panama Canal expansion
puts DSME in an attractive position to seize much of the USD
15bn p.a. opportunity we expect in 2013-16.
Top pick. We do not consider current valuation demanding. The
stock is trading at 13.2x 2014E PER and 1.4x 2014E PBR versus
2014E ROE of 10.4%. Our 12-month price target is KRW 45,000,
based on backlog and EBITDA the average of target EV/backlog
and EV/EBITDA. DSME is our sector top pick. Our price target is
27% above the present level.
Source: Company, Standard Chartered Research estimates
Share price performance
Source: Company, FactSet
PRICE as of 9 Oct 2013
KRW 35,350
PRICE TARGET
KRW 45,000
Bloomberg code Reuters code
042660 KS 042660.KS
Market cap 12-month range
KRW 6,766.0bn (USD 6,301mn) KRW 21,100 - 35,400
EPS adj est change NA
Year-end: December 2012 2013E 2014E 2015E
Sales (KRW bn) 14,058 14,842 15,072 15,241
EBITDA (KRW bn) 788 652 1,063 1,194
EBIT (KRW bn) 486 402 817 948
Pre-tax profit (KRW bn) 265 342 780 911
Net profit adj. (KRW bn) (38) 156 513 615
FCF (KRW bn) (2,126) (99) 610 603
EPS adj. (KRW) (199) 814 2,680 3,211
DPS (KRW) 250 500 500 500
Book value/share (KRW) 23,796 24,337 26,038 28,626
EPS growth adj. (%) nm nm 229.0 19.8
DPS growth (%) 1.2 100.0 0.0 0.0
EBITDA margin (%) 5.6 4.4 7.1 7.8
EBIT margin (%) 3.5 2.7 5.4 6.2
Net margin adj. (%) -0.3 1.1 3.4 4.0
Div. payout (%) -104.0 65.2 19.0 15.9
Net gearing (%) 113.6 116.3 100.3 83.0
ROE (%) -1.0 3.2 10.4 11.5
ROCE (%) 6.4 5.0 9.9 10.9
EV/sales (x) 0.7 0.8 0.8 0.7
EV/EBITDA (x) 12.3 18.7 11.1 9.5
PBR (x) 1.1 1.5 1.4 1.2
PER adj. (x) nm 43.4 13.2 11.0
Dividend yield (%) 0.9 1.4 1.4 1.4
20,000
29,000
38,000
10-12 1-13 4-13 7-13 10-13
Daewoo Shipbuilding & Marine Engineering
KOSPI INDEX (rebased)
Share price (%) -1 mth -3 mth -12 mth
Ordinary shares 11 30 39
Relative to index 10 19 38
Relative to sector - - -
Major shareholder Korea Development Bank (31.5%)
Free float 50%
Average turnover (USD) 30,447,046
James KP Hong
James.KP.Hong@sc.com
+82 2 3703 5164
Equity Research l Korea shipbuilding
10 October 2013 51
A new chapter
Earnings outlook
We factor in a strong profitability improvement in DSME from 2014E, mainly due to
the learning effect as it produces more 18,000 TEU container ships and offshore
production platforms. With limited downside potential from its struggling subsidiaries,
we expect a clear improvement in profitability from 2014.
Figure 97: DSME earnings outlook
(KRW bn, %) 1Q13 2Q13 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E 2012 2013E 2014E 2015E
Revenue 3,259 4,088 3,636 3,859 3,798 3,798 3,798 3,678 14,058 14,842 15,072 15,241
YoY growth 6.3% 3.5% 14.7% -0.3% 16.5% -7.1% 4.5% -4.7% 1.1% 5.6% 1.5% 1.1%
Shipbuilding & offshore 3,150 3,987 3,489 3,613 3,607 3,607 3,607 3,549 13,386 14,239 14,369 14,374
Construction & others 285 346 456 702 482 482 482 444 1,858 1,789 1,889 2,053
Consolidation adjustment -176 -245 -309 -456 -290 -290 -290 -316 -1,186 -1,186 -1,186 -1,186
EBIT 67 127 94 114 189 215 210 203 486 402 817 948
YoY growth -62.9% 11.1% -45.9% 29.3% 181.3% 69.3% 124.0% 77.8% -55.3% -17.3% 103.2% 16.0%
Shipbuilding & offshore 63 139 129 145 151 159 166 170 435 476 646 719
Construction & others 3 9 13 21 12 12 12 11 -39 46 47 62
Consolidation adjustment 0 -21 -48 -51 26 44 32 22 91 -119 124 186
EBIT margin 2.1% 3.1% 2.6% 3.0% 5.0% 5.7% 5.5% 5.5% 3.5% 2.7% 5.4% 6.2%
Shipbuilding & offshore 2.0% 3.5% 3.7% 4.0% 4.2% 4.4% 4.6% 4.8% 3.2% 3.3% 4.5% 5.0%
Construction & others 1.1% 2.6% 2.8% 3.0% 2.5% 2.5% 2.5% 2.5% -2.1% 2.6% 2.5% 3.0%
Pre-tax profit 76 77 85 105 180 205 201 194 265 342 780 911
YoY growth -53.7% -8.7% -14.3% -370.8% 185.4% 215.4% 98.2% 61.0% -73.4% 56.9% 123.1% 154.9%
PBT margin 2.3% 1.9% 2.3% 2.7% 4.7% 5.4% 5.3% 5.3% 1.9% 2.3% 5.2% 6.0%
Net profit 49 53 65 81 138 158 155 149 176 247 600 701
YoY growth -60.5% -27.6% -22.5% -259.5% 241.8% 255.6% 98.2% 61.0% -72.9% 72.8% 135.1% 168.7%
NP margin 1.5% 1.3% 1.8% 2.1% 3.6% 4.2% 4.1% 4.1% 1.3% 1.7% 4.0% 4.6%
Source: Company, Standard Chartered Research estimates
Figure 98: Where we are versus consensus
2013E 2014E 2015E
(KRW bn, %) Us Consensus (Diff.) Us Consensus (Diff.) Us Consensus (Diff.)
Sales 14,842 14,805 0.3% 15,072 15,701 -4.0% 15,241 16,317 -6.6%
Operating profit 402 378 6.3% 817 715 14.2% 948 857 10.6%
Pre-tax profit 342 326 4.9% 780 689 13.2% 911 872 4.4%
Net profit 247 248 -0.4% 600 531 13.1% 701 669 4.9%
EBITDA 652 640 1.8% 1,063 990 7.3% 1,194 1,161 2.8%
OPM (%) 2.7% 2.6% 0.2ppt 5.4% 4.6% 0.9ppt 6.2% 5.3% 1.0ppt
NPM (%) 1.7% 1.7% 0.0ppt 4.0% 3.4% 0.6ppt 4.6% 4.1% 0.5ppt
Source: Company, Bloomberg, Standard Chartered Research estimates
Equity Research l Korea shipbuilding
10 October 2013 52
Order outlook
We expect DSME to benefit from VLPP container ship demand in 2013-16. It has
won six 18,000 TEU container ship orders YTD after winning 17 in 2012. DSME has
a strong relationship with Maersk, a leading container liner.
DSME has a strong track record in offshore platforms. It is building the worlds
second F-LNG, the Kanowit F-LNG, for Petronas. We expect another F-LNG order
win in the Tamar LNG field (from the Nobel Energy consortium) early next year.
In drilling rigs, DSME is climbing the learning curve on drillships and has won a high-
spec jack-up rig (c.USD 530mn) from Maersk Drilling.
Figure 99: DSME new order outlook
New orders (USD bn, %) 2010 2011 2012 2013E 2014E 2015E YTD progress % achieved
Shipbuilding 5.2 8.0 3.8 5.4 6.4 6.6 3.3 61%
LNG carriers
2.1 0.8 1.0 1.0 1.1
Container ships
4.7 0.0 2.4 3.4 3.5
Other*
1.2 3.0 2.0 2.0 2.0
Offshore 4.0 6.3 10.5 7.6 9.5 10.0 6.3 83%
Production facilities
1.7 6.4 3.0 4.7 5.0
Drilling rigs
4.0 3.5 4.0 4.2 4.4
Other
0.6 0.6 0.6 0.6 0.6
Total new orders 9.3 14.3 14.3 12.8 16.0 16.5 9.6 74%
YoY growth 158% 54% 0% -10% 25% 4%
*Tankers and other commercial vessels, specialty vessels.
Source: Company, Standard Chartered Research estimates
Valuation
Outperform rating, with a 12-month price target of KRW 45,000
We value DSEM using an average of EV/backlog and EV/EBITDA valuation
methodologies.
Our price target of KRW 45,000 implies 13.2x 2014E PER and 1.4x 2014E PBR. We
believe the share price has not yet fully reflected DSMEs turnaround and its growth
potential in the offshore platform business.
Based on EV/backlog, fair value is KRW 39,000.
Based on EV/EBITDA, fair vakue is KRW 51,000.
Global leader in VLPP
Strong track record in 18,000 TEU
Successful LNG-FPSO penetration
Equity Research l Korea shipbuilding
10 October 2013 53
EV/backlog
Our target operational EV/backlog is 23%, the average EV/backlog during 2012-2013
YTD. Since 2012, DSMEs offshore order wins have outpaced commercial vessel
orders, and its backlog has also turned offshore-centric.
Figure 100: EV/backlog
(KRW bn, %)
2014E
Modified backlog (A) 50,882
Target operational EV/backlog (B) 23%
Target operational EV (C) = (A) X (B) 11,703
Net debt (D) 4,345
Total market capitalisation (E) = (C) - (D) 7,458
Shares outstanding (mn) (F) 191
Fair value per share (E) / (F) KRW 39,000
Source: Company, Standard Chartered Research estimates
EV/EBITDA
We apply 13.2x for target operational EV/EBITDA in valuing the company. Our target
valuation multiple is in line with DSMEs mid-cycle EV/EBITDA during 2012-2013
YTD.
Figure 101: EV/EBITDA
(KRW bn)
2014E
2014E EBITDA (A) 1,063
Target operational EV/EBITDA (x) (B) 13.2
Target operational EV (C) = (A) X (B) 14,032
Net debt (D) 4,345
Total market capitalisation (E) = (C) - (D) 9,687
Shares outstanding (mn) (F) 191
Fair value per share (E) / (F) KRW 51,000
Source: Company, Standard Chartered Research estimates
Figure 102: Historical EV/backlog trend Figure 103: Historical EV/EBITDA trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
0%
10%
20%
30%
40%
2001 2003 2005 2007 2009 2011 2013
E
V
/
m
o
d
i
f
i
e
d
b
a
c
k
l
o
g
0
4
8
12
16
20
2001 2003 2005 2007 2009 2011 2013
E
V
/
E
B
I
T
D
A
(
x
)
Equity Research l Korea shipbuilding
10 October 2013 54
Figure 104: DSME EV/modified backlog Figure 105: DSME EV/EBITDA
Source: Company, Bloomberg, Standard Chartered Research estimates Source: Company, Bloomberg, Standard Chartered Research estimates
Figure 106: Historical PBR trend Figure 107: Historical PER trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
Potential risk
Figure 108: Shareholding structure, as of 2Q13
Source: Bloomberg
According to local media reports, Korea Development Bank, DSMEs main
shareholder has decided to sell 31.46% of DSMEs shares via open bid in 1H14. This
could be an ongoing share overhang issue. However, the companys fundamentals
remain strong and its competitiveness is well aligned with market demand.
0
3,000
6,000
9,000
12,000
15,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRWbn) x0.10 x0.15
x0.19 x0.24 x0.28
0
3,000
6,000
9,000
12,000
15,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRWbn) x2.3 x4.8
x7.0 x11.2 x15.3
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
DSME x0.7 x1.0
x1.3 x1.6 x1.9
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
DSME x5.0 x10.0
x15.0 x20.0 x25.0
Korea
Development Bank
32%
FSAC
17%
NPS
8%
DSME
1%
Others
42%
Equity Research l Korea shipbuilding
10 October 2013 55
Source: Company, Standard Chartered Research estimates
Income statement (KRW bn) Cash flow statement (KRW bn)
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Sales 13,903 14,058 14,842 15,072 15,241 EBIT 1,089 486 402 817 948
Gross profit 1,634 1,136 1,000 1,464 1,600 Depreciation & amortisation 372 302 250 246 246
SG&A (545) (650) (598) (646) (652) Net interest 63 (20) (40) (40) (40)
Other income 0 0 0 0 0 Tax paid (548) (173) (173) (173) (173)
Other expenses 0 0 0 0 0 Changes in working capital (843) (1,338) (298) 61 (47)
EBIT 1,089 486 402 817 948 Others 715 (1,283) (98) (159) (189)
Net interest 17 (20) (18) (40) (40) Cash flow from operations 848 (2,026) 43 752 745
Associates (71) 1 (5) (6) (6)
Other non-operational (37) (202) (37) 8 8 Capex (100) (100) (142) (142) (142)
Exceptional items 0 0 0 0 0 Acquisitions & Investments 0 0 0 0 0
Pre-tax profit 998 265 342 780 911 Disposals 0 0 0 0 0
Taxation (349) (89) (95) (179) (209) Others 215 92 (90) (92) (92)
Minority interests (686) (222) (100) (98) (98) Cash flow from investing 115 (9) (232) (235) (235)
Exceptional items after tax 0 0 0 0 0
Net profit (38) (46) 147 503 604 Dividends (95) (47) 0 (96) (96)
Issue of shares 0 0 0 0 0
Net profit adj. (31) (38) 156 513 615 Change in debt (1,080) 1,443 (32) 34 34
EBITDA 1,461 788 652 1,063 1,194 Other financing cash flow 141 364 (54) 0 0
Cash flow from financing (1,034) 1,760 (86) (62) (62)
EPS (KRW) (199) (240) 767 2,627 3,154
EPS adj. (KRW) (163) (199) 814 2,680 3,211 Change in cash (71) (275) (275) 456 449
DPS (KRW) 247 250 500 500 500 Exchange rate effect 0 0 0 0 0
Avg fully diluted shares (mn) 191 191 191 191 191 Free cash flow 748 (2,126) (99) 610 603
Balance sheet (KRW bn) Financial ratios and other
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Cash 542 267 (8) 448 897 Operating ratios
Short-term investments 430 453 467 481 481 Gross margin (%) 11.8 8.1 6.7 9.7 10.5
Accounts receivable 4,943 3,883 3,906 3,768 3,810 EBITDA margin (%) 10.5 5.6 4.4 7.1 7.8
Inventory 752 1,198 1,284 1,262 1,265 EBIT margin (%) 7.8 3.5 2.7 5.4 6.2
Other current assets 951 1,359 1,435 1,457 1,474 Net margin adj. (%) -0.2 -0.3 1.1 3.4 4.0
Total current assets 7,618 7,160 7,083 7,416 7,926 Effective tax rate (%) 35.0 33.7 27.8 23.0 23.0
Sales growth (%) 6.7 1.1 5.6 1.5 1.1
PP&E 6,504 6,219 6,206 6,109 6,109 Net income growth (%) nm nm nm 242.4 20.0
Intangible assets 123 133 128 122 122 EPS growth (%) nm nm nm 242.4 20.0
Associates and JVs 19 61 55 49 49 EPS growth adj. (%) nm nm nm 229.0 19.8
Other long-term assets 2,396 2,549 2,625 2,704 2,704 DPS growth (%) -50.0 1.2 100.0 0.0 0.0
Total long-term assets 9,042 8,962 9,014 8,984 8,984
Efficiency ratios
Total assets 16,660 16,122 16,097 16,400 16,910 ROE (%) -0.9 -1.0 3.2 10.4 11.5
ROCE (%) 16.0 6.4 5.0 9.9 10.9
Short-term debt 2,776 2,972 2,972 2,972 2,972 Asset turnover (x) 0.9 0.9 0.9 0.9 0.9
Accounts payable 6,340 4,904 4,773 4,693 4,704 Op. cash/EBIT (x) 0.8 -4.2 0.1 0.9 0.8
Other current liabilities 404 296 313 318 321 Depreciation/capex (x) 2.9 3.0 1.7 1.7 1.7
Total current liabilities 9,520 8,173 8,058 7,982 7,997 Inventory days 22.1 27.5 32.7 34.1 33.8
Accounts receivable days 124.2 114.6 95.8 92.9 90.7
Long-term debt 1,601 2,470 2,438 2,472 2,472 Accounts payable days 123.7 158.8 127.6 126.9 125.7
Convertible bonds 0 0 0 0 0
Deferred tax 378 332 332 332 332 Leverage ratios
Other long-term liabilities 659 593 611 629 629 Net gearing (%) 85.2 113.6 116.3 100.3 83.0
Total long-term liabilities 2,638 3,395 3,381 3,434 3,434 Debt/capital (%) 61.3 68.5 67.3 64.7 61.1
Interest cover (x) 9.3 3.1 3.5 6.8 7.9
Total liabilities 12,158 11,568 11,440 11,416 11,431 Debt/EBITDA (x) 2.6 6.2 8.3 5.1 4.6
Current ratio (x) 0.8 0.9 0.9 0.9 1.0
Shareholders funds 4,502 4,554 4,658 4,983 5,479
Minority interests 0 0 0 0 0 Valuation
EV/sales (x) 0.7 0.7 0.8 0.8 0.7
Total equity 4,502 4,554 4,658 4,983 5,479 EV/EBITDA (x) 6.7 12.3 18.7 11.1 9.5
EV/EBIT (x) 9.0 20.0 30.3 14.4 11.9
Total liabilities and equity 16,660 16,122 16,097 16,400 16,910 PER (x) nm nm 46.1 13.5 11.2
PER adj. (x) nm nm 43.4 13.2 11.0
Net debt (cash) 3,836 5,175 5,418 4,996 4,548 PBR (x) 1.0 1.1 1.5 1.4 1.2
Year-end shares (mn) 191 191 191 191 191 Dividend yield (%) 0.7 0.9 1.4 1.4 1.4
Equity Research l Korea shipbuilding
10 October 2013 56
Samsung Heavy Industries
Industry leader
We initiate coverage of Samsung Heavy Industries (SHI)
with an Outperform rating.
SHI should benefit from first-mover advantage in the F-LNG
and Oil-FPSO segments. It is leveraging a learning effect in
drillships and LNG carriers, where it is a global leader.
From 2013 we expect SHIs order wins to rise to over USD
14bn.
SHI is an industry leader, but is trading below regional
peers. However, we see robust growth potential in the
offshore segment, which we believe justifies a re-rating.
n OUTPERFORM (initiating coverage)
Industry leader. SHI is the leader in the offshore segment, and is
building the worlds first F-LNG (the Prelude F-LNG, for Shell) and
Oil-FPSO (the Egina project, for Total). We believe its capability in
FPSO units mean it is well-positioned to capture much of the USD
15bn p.a. opportunity we expect in the global offshore platform
market over 2013-19. SHI is working closely with Shell in
developing F-LNG (exclusive order agreement), the platforms that
are a game changer in the global LNG industry.
Solid drillship and LNG carrier orders. SHI has two strong cash
cows drillships and LNG carriers. We expect a strong learning
effect in both products, which should enable the company to
deliver solid earnings growth. We expect SHI to win orders for 10
drillships (c.USD 500mn each) and 14 LNG carriers (c.USD
200mn each) p.a. in 2014-16. It recently won two high-spec jack-
up orders from Statoil (c.USD 650mn each, three times more than
jack-ups built by Singaporean shipyards).
Orders set to rise. Despite having the highest earnings visibility
among Koreas big three, SHI has been trading at a discount to
peers, mainly due to weak top-line growth. However, we believe it
is entering another growth stage driven by offshore drilling and
platform opportunities. In 2013, we expect order wins to reach
USD 14.3bn (+49% YoY), and remain in the USD 15bn range in
2014-16.
Deserves re-rating. We think SHI deserves a valuation re-rating.
The shares are trading at 10.2x 2014E PER and 1.4x 2014E PBR
compared to 2014E ROE of 14.9%. We value the company based
on backlog and EBITDA the average of target EV/backlog and
EV/EBITDA. Our 12-month price target is KRW 55,000, which
implies 24% upside potential.
Source: Company, Standard Chartered Research estimates
Share price performance
Source: Company, FactSet
PRICE as of 9 Oct 2013
KRW 44,500
PRICE TARGET
KRW 55,000
Bloomberg code Reuters code
010140 KS 010140.KS
Market cap 12-month range
KRW 10,279.5bn (USD 9,573mn) KRW 29,800 - 44,500
EPS adj est change NA
Year-end: December 2012 2013E 2014E 2015E
Sales (KRW bn) 14,489 15,220 15,660 16,156
EBITDA (KRW bn) 1,491 1,572 1,593 1,784
EBIT (KRW bn) 1,189 1,280 1,306 1,496
Pre-tax profit (KRW bn) 1,063 1,402 1,304 1,495
Net profit adj. (KRW bn) 811 1,036 1,004 1,151
FCF (KRW bn) (1,527) 1,168 1,515 1,305
EPS adj. (KRW) 3,515 4,489 4,350 4,986
DPS (KRW) 469 500 500 500
Book value/share (KRW) 22,871 27,247 31,095 31,731
EPS growth adj. (%) 7.2 27.7 -3.1 14.6
DPS growth (%) 0.1 6.6 0.0 0.0
EBITDA margin (%) 10.3 10.3 10.2 11.0
EBIT margin (%) 8.2 8.4 8.3 9.3
Net margin adj. (%) 5.6 6.8 6.4 7.1
Div. payout (%) 13.4 10.3 11.5 10.0
Net gearing (%) 14.3 -0.9 -16.8 -26.4
ROE (%) 16.3 19.5 14.9 15.9
ROCE (%) 17.8 16.0 14.6 15.1
EV/sales (x) 0.7 0.7 0.6 0.5
EV/EBITDA (x) 6.3 6.5 5.7 4.5
PBR (x) 1.7 1.6 1.4 1.4
PER adj. (x) 10.5 9.9 10.2 8.9
Dividend yield (%) 1.3 1.1 1.1 1.1
30,000
38,000
46,000
10-12 1-13 4-13 7-13 10-13
Samsung Heavy Industries KOSPI INDEX (rebased)
Share price (%) -1 mth -3 mth -12 mth
Ordinary shares 6 19 25
Relative to index 5 8 24
Relative to sector - - -
Major shareholder Samsung Electronics (17.6%)
Free float 76%
Average turnover (USD) 39,624,085
James KP Hong
James.KP.Hong@sc.com
+82 2 3703 5164
Equity Research l Korea shipbuilding
10 October 2013 57
Industry leader
Earnings outlook
We have factored in improving profitability for SHI. Our above consensus earnings
forecasts from 2014 are mainly driven by offshore production platforms.
Figure 109: SHI earnings outlook
(KRW bn, %) 1Q13 2Q13 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E 2012 2013E 2014E 2015E
Revenue 3,888 3,798 3,729 3,805 3,946 3,946 3,946 3,821 14,489 15,220 15,660 16,156
YoY growth 9.9% 13.3% -8.1% 7.5% 1.5% 3.9% 5.8% 0.4% 8.2% 5.0% 2.9% 3.2%
Shipbuilding & Offshore 3,806 3,600 3,553 3,542 3,755 3,755 3,755 3,695 13,634 14,500 14,961 15,472
Construction & others 167 163 210 284 205 205 205 189 856 824 803 788
Consolidation adjustment -86 36 -34 -20 -14 -14 -14 -63 -1 -104 -104 -104
EBIT 440 286 272 282 345 300 392 270 1,189 1,280 1,306 1,496
YoY growth 30.7% 8.2% -15.9% 6.8% -21.7% 4.7% 43.8% -4.3% 2.5% 7.7% 2.0% 14.6%
Shipbuilding & Offshore 472 324 327 333 353 353 353 347 1,338 1,456 1,406 1,547
Construction & others 6 2 7 9 7 7 7 6 35 24 26 25
Consolidation adjustment -38 -40 -61 -60 -15 -60 32 -84 -184 -199 -127 -760
EBIT margin 11.3% 7.5% 7.3% 7.4% 8.7% 7.6% 9.9% 7.1% 8.2% 8.4% 8.3% 9.3%
Shipbuilding & Offshore 12.4% 9.0% 9.2% 9.4% 9.4% 9.4% 9.4% 9.4% 9.8% 10.0% 9.4% 10.0%
Construction & others 3.5% 1.4% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 4.1% 2.9% 3.2% 3.2%
Pre-tax profit 383 288 257 266 344 299 391 269 1,063 1,402 1,304 1,495
YoY growth 16.7% 15.3% -25.8% 121.3% -10.2% 4.1% 52.5% 1.4% 0.6% 31.8% -6.9% 6.7%
PBT margin 9.9% 7.6% 6.9% 7.0% 8.7% 7.6% 9.9% 7.0% 7.3% 9.2% 8.3% 9.3%
Net profit 300 215 198 205 265 230 301 207 811 1,126 1,004 1,151
YoY growth 20.3% 11.5% -28.4% 179.5% -11.8% 7.0% 52.5% 1.4% 7.2% 38.8% -10.8% 2.2%
NP margin 7.7% 5.7% 5.3% 5.4% 6.7% 5.8% 7.6% 5.4% 5.6% 7.4% 6.4% 7.1%
Source: Company, Standard Chartered Research estimates
Figure 110: Where we are versus consensus
2013E 2014 2015E
(KRW bn, %) Us Consensus (Diff.) Us Consensus (Diff.) Us Consensus (Diff.)
Sales 15,220 15,052 1.1% 15,660 15,364 1.9% 16,156 15,818 2.1%
Operating profit 1,280 1,261 1.5% 1,306 1,201 8.7% 1,496 1,263 18.5%
Pre-tax profit 1,402 1,230 14.0% 1,304 1,203 8.4% 1,495 1,256 19.0%
Net profit 1,126 938 20.1% 1,004 916 9.7% 1,151 956 20.4%
EBITDA 1,572 1,532 2.6% 1,593 1,507 5.7% 1,784 1,555 14.7%
OPM (%) 8.4% 8.4% 0.0ppt 8.3% 7.8% 0.5ppt 9.3% 8.0% 1.3ppt
NPM (%) 7.4% 6.2% 1.2ppt 6.4% 6.0% 0.5ppt 7.1% 6.0% 1.1ppt
Source: Company, Bloomberg, Standard Chartered Research estimates
Equity Research l Korea shipbuilding
10 October 2013 58
Order outlook
In 2014-16, we expect SHI to win orders for 10 drillships (c.USD 500mn each) and 14
LNG carriers (c.USD 200mn each) a year. We see potential upside risk for drilling
rigs, from jack-up orders. SHI recently won two high-spec jack-up orders from Statoil.
The price tags of these jack-ups are three times greater than those for jack-ups built
by Singaporean shipyards.
In addition to stable drilling rig and LNG carrier orders, we expect SHI to win two F-
LNG orders a year. Shell and SHI have been working on the worlds first F-LNG and
SHI has an exclusive order contract with Shell. Moreover, SHI is working with Total
on the worlds first Oil-FPSO (for the Egina project).
We believe these orders are highly lucrative and give SHI first-mover advantages in
these new high-end segments.
Figure 111: SHI new order outlook
New order (USD bn, %) 2010 2011 2012 2013E 2014E 2015E YTD % achieved
Shipbuilding 6.0 5.7 1.3 4.5 5.0 5.0 3.4 76%
LNG carriers 0.7 3.6 0.8 3.0 2.9 2.8 2.8 92%
Container ships 2.0 1.5 0.0 1.2 1.8 1.9 0.6 47%
Tankers 3.3 0.6 0.5 0.3 0.3 0.3 0.1 32%
Offshore 3.8 9.2 8.3 9.8 10.3 10.8 8.6 87%
Production facilities 1.7 3.3 3.4 4.5 4.7 5.0 3.3 73%
Drilling rigs 1.6 5.7 4.9 5.0 5.3 5.5 5.0 100%
Others 0.4 0.3 0.0 0.3 0.3 0.3 0.3 90%
Total new orders 9.7 14.9 9.6 14.3 15.3 15.7 12.0 84%
YoY growth 595% 53% -36% 49% 7% 3%
Source: Company, Standard Chartered Research estimates
Valuation
Outperform rating, with a 12-month price target of KRW 55,000
We value SHI by applying EV/backlog and EV/EBITDA valuations then averaging
them.
Our price target of KRW 55,000 implies 10.2x 2014E PER and 1.4x 2014E PBR. We
believe the current share price does not fully reflect SHIs growth potential in the
lucrative offshore platform business.
Based on EV/backlog, fair value is KRW 51,000.
Based on EV/EBITDA, fair value is KRW 59,000.
Drillships and LNG carriers are
SHIs cash cows
First-mover advantages in F-LNG,
Oil-FPSO and high-spec jack-ups
Equity Research l Korea shipbuilding
10 October 2013 59
EV/backlog
We apply a target operational EV/backlog of 20%, the average EV/backlog in 2011-
2013 YTD. Since 2011, SHIs offshore order wins have outpaced commercial vessel
orders, and its backlog has also turned offshore-centric.
Figure 112: EV/backlog
(KRW bn, %)
2014E
Modified backlog (A) 49,476
Target operational EV/backlog (B) 20%
Target operational EV (C) = (A) X (B) 10,118
Net debt (D) -1,588
Total market capitalisation (E) = (C) - (D) 11,706
Shares outstanding (mn) (F) 231
Fair value per share (E) / (F) KRW 51,000
Source: Company, Standard Chartered Research estimates
EV/EBITDA
We apply a target operational EV/EBITDA of 7.5x, SHIs mid-cycle EV/EBITDA
during the 2007-08 China super-cycle. We see significant growth potential for SHI in
the offshore segment (drilling rigs and production platforms), and believe this justifies
our high target valuation multiple.
Figure 113: EV/EBITDA
(KRW bn)
2014E
2014E EBITDA (A) 1,593
Target operational EV/EBITDA (x) (B) 7.5
Target operational EV (C) = (A) X (B) 11,949
Net debt (D) -1,588
Total market capitalisation (E) = (C) - (D) 13,537
Shares outstanding (mn) (F) 231
Fair value per share (E) / (F) KRW 59,000
Source: Company, Standard Chartered Research estimates
Figure 114: Historical EV/backlog trend Figure 115: Historical EV/EBITDA trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
0%
10%
20%
30%
40%
2001 2003 2005 2007 2009 2011 2013
E
V
/
m
o
d
i
f
i
e
d
b
a
c
k
l
o
g
-6
-3
0
3
6
9
12
2001 2003 2005 2007 2009 2011 2013
E
V
/
E
B
I
T
D
A
(
x
)
Equity Research l Korea shipbuilding
10 October 2013 60
Figure 116: SHI EV/modified backlog Figure 117: SHI EV/EBITDA
Source: Company, Bloomberg, Standard Chartered Research estimates Source: Company, Bloomberg, Standard Chartered Research estimates
Figure 118: Historical PBR trend Figure 119: Historical PER trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
Potential risks
SHIs product portfolio is skewed towards specialty-vessels and the offshore
segment. We see potential downside risk if the commercial vessel market recovers
faster than we expect. Another potential risk could arise from Samsung Groups
restructuring. While SHI is not deeply involved in the groups cross-holding structure,
SHI is not free from potential risks from Samsung Groups ongoing restructuring
0
3,000
6,000
9,000
12,000
15,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRW bn) x0.15 x0.18
x0.21 x0.25 x0.28
0
3,000
6,000
9,000
12,000
15,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRW bn) x4.2 x5.7
x7.7 x9.1 x11.1
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
SHI x1.1 x1.4
x1.7 x2.0 x2.3
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
SHI x6.0 x8.0
x10.0 x12.0 x14.5
Equity Research l Korea shipbuilding
10 October 2013 61
Source: Company, Standard Chartered Research estimates
Income statement (KRW bn) Cash flow statement (KRW bn)
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Sales 13,392 14,489 15,220 15,660 16,156 EBIT 1,160 1,189 1,280 1,306 1,496
Gross profit 1,763 1,935 2,028 2,101 2,312 Depreciation & amortisation 372 302 292 288 288
SG&A (681) (729) (748) (796) (816) Net interest 106 (18) 8 8 8
Other income 77 (17) 0 0 0 Tax paid (548) (173) 0 0 0
Other expenses 0 0 0 0 0 Changes in working capital 696 (1,646) (180) 292 (65)
EBIT 1,160 1,189 1,280 1,306 1,496 Others (740) (1,080) (132) (278) (322)
Net interest (71) 56 (56) (65) (67) Cash flow from operations 1,046 (1,427) 1,268 1,615 1,405
Associates (32) (0) (1) (1) (1)
Other non-operational 0 (181) 178 65 67 Capex (100) (100) (100) (100) (100)
Exceptional items 0 0 0 0 0 Acquisitions & Investments 0 0 0 0 0
Pre-tax profit 1,056 1,063 1,402 1,304 1,495 Disposals 0 0 0 0 0
Taxation (299) (252) (275) (300) (344) Others 261 272 (9) (9) (9)
Minority interests 0 0 0 0 0 Cash flow from investing 115 (9) (282) (283) (283)
Exceptional items after tax 0 0 0 0 0
Net profit 757 811 1,126 1,004 1,151 Dividends (108) (108) (115) (115) (115)
Issue of shares 0 0 0 0 0
Net profit adj. 757 811 1,036 1,004 1,151 Change in debt (1,080) 1,443 (94) 4 4
EBITDA 1,532 1,491 1,572 1,593 1,784 Other financing cash flow 389 224 0 0 0
Cash flow from financing (799) 1,559 (209) (112) (112)
EPS (KRW) 3,277 3,513 4,876 4,348 4,984
EPS adj. (KRW) 3,279 3,515 4,489 4,350 4,986 Change in cash 362 123 777 1,220 1,010
DPS (KRW) 469 469 500 500 500 Exchange rate effect 0 0 0 0 0
Avg fully diluted shares (mn) 231 231 231 231 231 Free cash flow 946 (1,527) 1,168 1,515 1,305
Balance sheet (KRW bn) Financial ratios and other
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Cash 806 929 1,706 2,926 3,935 Operating ratios
Short-term investments 565 293 302 311 311 Gross margin (%) 13.2 13.4 13.3 13.4 14.3
Accounts receivable 3,986 5,033 5,073 4,894 5,049 EBITDA margin (%) 11.4 10.3 10.3 10.2 11.0
Inventory 540 699 735 755 771 EBIT margin (%) 8.7 8.2 8.4 8.3 9.3
Other current assets 3,527 3,322 3,489 3,590 3,704 Net margin adj. (%) 5.7 5.6 6.8 6.4 7.1
Total current assets 9,424 10,276 11,305 12,475 13,770 Effective tax rate (%) 28.3 23.7 19.6 23.0 23.0
Sales growth (%) 2.3 8.2 5.0 2.9 3.2
PP&E 5,408 5,278 5,263 5,223 5,223 Net income growth (%) -14.8 7.2 38.8 -10.8 14.6
Intangible assets 86 38 32 26 26 EPS growth (%) -14.8 7.2 38.8 -10.8 14.6
Associates and JVs 0 6 5 4 4 EPS growth adj. (%) -14.8 7.2 27.7 -3.1 14.6
Other long-term assets 1,495 1,037 1,069 1,101 1,101 DPS growth (%) 0.3 0.1 6.6 0.0 0.0
Total long-term assets 6,990 6,359 6,369 6,354 6,354
Efficiency ratios
Total assets 16,414 16,635 17,674 18,829 20,124 ROE (%) 17.9 16.3 19.5 14.9 15.9
ROCE (%) 19.6 17.8 16.0 14.6 15.1
Short-term debt 1,684 925 925 925 925 Asset turnover (x) 0.8 0.9 0.9 0.9 0.8
Accounts payable 4,982 4,664 4,549 4,675 4,774 Op. cash/EBIT (x) 0.9 -1.2 1.0 1.2 0.9
Other current liabilities 3,873 3,545 3,723 3,831 3,952 Depreciation/capex (x) 2.9 3.0 2.9 2.8 2.8
Total current liabilities 10,539 9,133 9,197 9,431 9,651 Inventory days 17.1 18.0 19.8 20.1 20.1
Accounts receivable days 127.0 113.6 121.2 116.2 112.3
Long-term debt 100 814 721 724 724 Accounts payable days 117.6 140.2 127.5 124.2 124.6
Convertible bonds 0 0 0 0 0
Deferred tax 29 43 43 43 43 Leverage ratios
Other long-term liabilities 1,102 981 1,010 1,041 1,041 Net gearing (%) 21.1 14.3 -0.9 -16.8 -26.4
Total long-term liabilities 1,231 1,839 1,774 1,808 1,808 Debt/capital (%) 30.4 23.2 19.4 17.5 15.7
Interest cover (x) 5.4 44.2 13.5 13.9 15.6
Total liabilities 11,770 10,972 10,971 11,239 11,459 Debt/EBITDA (x) 1.5 1.2 1.1 1.0 0.9
Current ratio (x) 0.9 1.1 1.2 1.3 1.4
Shareholders funds 4,644 5,283 6,294 7,183 7,330
Minority interests (0) 380 408 407 1,335 Valuation
EV/sales (x) 0.8 0.7 0.7 0.6 0.5
Total equity 4,644 5,663 6,702 7,590 8,665 EV/EBITDA (x) 6.8 6.3 6.5 5.7 4.5
EV/EBIT (x) 8.9 7.9 8.0 6.9 5.3
Total liabilities and equity 16,414 16,635 17,673 18,829 20,123 PER (x) 11.5 10.5 9.1 10.2 8.9
PER adj. (x) 11.5 10.5 9.9 10.2 8.9
Net debt (cash) 978 810 (60) (1,277) (2,286) PBR (x) 1.4 1.7 1.6 1.4 1.4
Year-end shares (mn) 231 231 231 231 231 Dividend yield (%) 1.2 1.3 1.1 1.1 1.1
Equity Research l Korea shipbuilding
10 October 2013 62
Hyundai Heavy Industries
A late-cycle play
We initiate coverage of Hyundai Heavy Industries (HHI) with
an In-Line rating.
Notwithstanding HHIs strong order wins YTD, its earnings
turnaround has been slower than the market expected. We
believe the market is overestimating ROE accretion
possibilities.
We think the slower-than-expected earnings recovery could
lead to profit taking after the recent rally in the share price.
We recommend investors focus on DSME and SHI, which
we consider better positioned to capture the USD 50bn p.a.
opportunity in shipbuilding new orders we expect over the
next few years.
n IN-LINE (initiating coverage)
Slow recovery. We think the market has overestimated ROE
accretion possibilities for HHI and its CV-centric subsidiaries.
Notwithstanding its strong order wins YTD, we remain cautious on
order quality, mainly due to slower-than-expected increases in
new-build prices for most CV types (except for post-Panamax
container ships and MR tankers). Without a full-fledged recovery in
new-build prices, we think HHI could disappoint the market with a
slower-than-expected earnings recovery.
Cost competitiveness maintained. We believe HHI is the most
cost competitive Korean shipbuilder, leveraging its largest capacity
(HHI, Hyundai Mipo Dockyard and Hyundai Samho Heavy
Industries) and vertical integration (engines and machinery).
However, among the big three, it is also the most exposed to
competition from second-tier Korean shipbuilders and regional
shipbuilders. We could see HHI turn more profit-sensitive after
reaching a two-year order backlog, which we expect to happen
around mid-2014.
Demanding valuation. We consider valuation quite demanding at
23.4x 2014E PER and 1.0x 2014E PBR versus 2014E ROE of
4.2%. Our 12-month price target is KRW 280,000, based on
backlog and EBITDA the average of target EV/backlog and
EV/EBITDA. We apply the mid-cycle valuation multiples from the
last upturn (2009-11). In EV/EBITDA terms, HHI is already trading
near its historical high, while we see no fundamental support for a
re-rating.
Source: Company, Standard Chartered Research estimates
Share price performance
Source: Company, FactSet
PRICE as of 9 Oct 2013
KRW 267,000
PRICE TARGET
KRW 280,000
Bloomberg code Reuters code
009540 KS 009540.KS
Market cap 12-month range
KRW 20,292.0bn (USD 18,898mn) KRW 172,000 - 271,500
EPS adj est change NA
Year-end: December 2012 2013E 2014E 2015E
Sales (KRW bn) 54,974 55,282 56,603 57,061
EBITDA (KRW bn) 3,000 2,217 2,402 2,705
EBIT (KRW bn) 1,993 1,242 1,437 1,751
Pre-tax profit (KRW bn) 1,436 1,014 1,207 1,472
Net profit adj. (KRW bn) 184 776 868 1,050
FCF (KRW bn) (4,549) 2,311 333 310
EPS adj. (KRW) 2,421 10,216 11,426 13,821
DPS (KRW) 4,000 4,000 4,000 4,000
Book value/share (KRW) 272,521 269,326 278,010 289,710
EPS growth adj. (%) -92.8 321.9 11.8 21.0
DPS growth (%) -42.9 0.0 0.0 0.0
EBITDA margin (%) 5.5 4.0 4.2 4.7
EBIT margin (%) 3.6 2.2 2.5 3.1
Net margin adj. (%) 0.3 1.4 1.5 1.8
Div. payout (%) 165.2 39.2 35.0 28.9
Net gearing (%) 111.6 114.5 110.6 104.6
ROE (%) 0.9 3.8 4.2 4.9
ROCE (%) 7.9 4.6 5.3 6.2
EV/sales (x) 0.8 0.8 0.8 0.8
EV/EBITDA (x) 14.5 19.7 18.2 16.0
PBR (x) 0.9 1.0 1.0 0.9
PER adj. (x) 109.6 26.1 23.4 19.3
Dividend yield (%) 1.5 1.5 1.5 1.5
170,000
225,000
280,000
10-12 1-13 4-13 7-13 10-13
Hyundai Heavy Industries KOSPI INDEX (rebased)
Share price (%) -1 mth -3 mth -12 mth
Ordinary shares 10 44 9
Relative to index 8 32 8
Relative to sector - - -
Major shareholder Hyundai Heavy Industries (19.4%)
Free float 59%
Average turnover (USD) 50,732,884
James KP Hong
James.KP.Hong@sc.com
+82 2 3703 5164
Equity Research l Korea shipbuilding
10 October 2013 63
Steady but slow
Earnings outlook
We remain cautious on HHI, especially on its shipbuilding and oil refinery businesses,
which we expect to account for 66% of 2014 sales. As we expect steel plate prices to
be flat in 2014, we see little room for profitability improvement in the shipbuilding
business. In the oil refinery business, we expect a weak cash refining margin of USD
3.8/barrel in 2014 (USD 4.2/ barrel in 2013E).
Figure 120: HHI earnings outlook
(KRW bn, %) 1Q13 2Q13 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E 2012 2013E 2014E 2015E
Revenue 13,143 13,091 13,301 15,747 13,971 13,562 13,497 15,572 54,974 55,282 56,603 57,061
YoY growth -5.7% -4.4% 0.8% 11.4% 6.3% 3.6% 1.5% -1.1% 2.3% 0.6% 2.4% 0.8%
Shipbuilding (incl. drillships) 4,182 4,447 4,121 4,760 4,656 4,616 4,304 4,909 17,788 17,509 18,485 18,715
Offshore & Engineering 1,054 1,239 1,226 1,651 1,030 1,181 1,122 1,621 4,382 5,170 4,954 4,954
Engine & Machinery 342 422 358 199 416 438 463 250 2,011 1,322 1,567 1,567
Industrial Plant 232 260 511 1,078 516 496 643 1,047 1,431 2,081 2,702 2,702
Construction Equipment 960 1,029 1,042 2,385 1,210 1,165 1,040 2,022 3,791 5,416 5,437 5,439
Electric-Electro Systems 626 731 795 644 733 881 879 775 2,873 2,796 3,269 3,269
Renewable Energy 84 57 69 125 121 77 82 111 337 334 391 391
Oil Refinery 5,468 4,664 4,952 4,676 5,083 4,455 4,723 4,610 21,499 19,760 18,871 19,062
Finance 154 177 157 178 161 186 165 187 634 666 699 734
Others 42 64 70 51 44 68 74 42 227 227 227 227
EBIT 378 289 280 295 354 360 347 376 1,994 1,242 1,437 1,751
YoY growth -61.0% -19.4% -52.8% 313.1% -6.3% 24.5% 23.8% 27.4% -56.0% -37.7% 15.7% 21.8%
Shipbuilding (incl. Drillship) 67 93 91 117 116 120 125 156 1,041 368 518 749
Offshore & Engineering 71 142 85 116 75 89 90 133 318 414 386 426
Engine & Machinery 38 43 39 25 50 55 63 37 347 145 204 251
Industrial Plant 14 20 41 92 39 35 42 47 106 167 162 122
Construction Equipment 69 86 89 218 111 111 94 174 276 460 489 517
Electric-Electro Systems -4 2 1 1 0 18 22 26 -75 0 65 163
Renewable Energy -15 -5 -5 -8 -7 -4 -4 -4 -106 -33 -20 0
Oil Refinery 197 59 109 103 95 83 88 86 308 427 351 409
Finance 8 10 9 12 13 19 17 21 95 40 70 95
Others -67 -160 -178 -380 -138 -164 -189 -299 -316 -744 -789 -981
EBIT margin 2.9% 2.2% 2.1% 1.9% 2.5% 2.7% 2.6% 2.4% 3.6% 2.2% 2.5% 3.1%
Shipbuilding (incl. Drillships) 1.6% 2.1% 2.2% 2.5% 2.5% 2.6% 2.9% 3.2% 5.9% 2.1% 2.8% 4.0%
Offshore & Engineering 6.7% 11.5% 6.9% 7.0% 7.3% 7.5% 8.0% 8.2% 7.3% 8.0% 7.8% 8.6%
Engine & Machinery 11.2% 10.1% 11.0% 12.5% 12.0% 12.5% 13.5% 14.6% 17.2% 11.0% 13.0% 16.0%
Industrial Plant 6.1% 7.6% 8.0% 8.5% 7.5% 7.0% 6.5% 4.5% 7.4% 8.0% 6.0% 4.5%
Construction Equipment 7.1% 8.3% 8.5% 9.1% 9.2% 9.5% 9.0% 8.6% 7.3% 8.5% 9.0% 9.5%
Electric-Electro Systems -0.6% 0.2% 0.1% 0.2% 0.0% 2.0% 2.5% 3.3% -2.6% 0.0% 2.0% 5.0%
Renewable Energy -17.8% -9.5% -7.0% -6.6% -6.0% -5.5% -5.0% -3.6% -31.6% -10.0% -5.0% 0.0%
Oil Refinery 3.6% 1.3% 2.2% 2.2% 1.9% 1.9% 1.9% 1.9% 1.4% 2.2% 1.9% 2.1%
Finance 5.0% 5.9% 6.0% 7.0% 8.0% 10.0% 10.5% 11.3% 14.9% 6.0% 10.0% 13.0%
Others -158.5% -248.2% -254.4% -750.2% -311.0% -242.0% -256.2% -713.8% -138.8% -327.2% -346.8% -431.0%
Pre-tax profit 347 92 282 294 300 304 288 315 1,437 1,014 1,207 1,510
YoY growth -54.7% -56.1% -72.1% -153.8% -13.3% 231.8% 2.3% 6.9% -62.9% -29.4% 19.0% 25.1%
PBT margin 2.6% 0.7% 2.1% 1.9% 2.2% 2.2% 2.1% 2.0% 2.6% 1.8% 2.1% 2.6%
Net profit 318 98 206 215 220 222 211 230 185 776 868 1,088
YoY growth -35.8% -25.7% -70.4% -163.5% -31.0% 126.3% 2.3% 6.9% -92.8% 319.1% 11.8% 25.2%
NP margin 2.4% 0.7% 1.5% 1.4% 1.6% 1.6% 1.6% 1.5% 0.3% 1.4% 1.5% 1.9%
Source: Company, FactSet, Standard Chartered Research estimates
Equity Research l Korea shipbuilding
10 October 2013 64
Figure 121: Where we are versus consensus
2013E 2014E 2015E
(KRW bn, %) Us Consensus (Diff.) Us Consensus (Diff.) Us Consensus (Diff.)
Sales 55,282 52,680 4.9% 56,603 54,309 4.2% 57,061 55,936 2.0%
Operating profit 1,242 1,424 -12.8% 1,437 1,566 -8.2% 1,751 2,007 -12.8%
Pre-tax profit 1,014 1,078 -5.9% 1,207 1,428 -15.5% 1,510 1,812 -16.7%
Net profit 769 830 -7.4% 915 1,030 -11.2% 1,144 1,324 -13.6%
EBITDA 2,217 2,521 -12.1% 2,402 2,787 -13.8% 2,705 3,157 -14.3%
OPM (%) 2.2% 2.7% -0.5ppt 2.5% 2.9% -0.3ppt 3.1% 3.6% -0.5ppt
NPM (%) 1.4% 1.6% -0.2ppt 1.6% 1.9% -0.3ppt 2.0% 2.4% -0.4ppt
Source: Company, FactSet, Standard Chartered Research estimates
Order outlook
Most leveraged to commercial vessel cycle
HHI is the worlds largest shipbuilder in terms of nameplate capacity. With two
commercial vessel-centric shipyards under its umbrella (Hyundai Mipo Dockyard and
Hyundai Samho Industries), it is somewhat difficult for HHI to adapt itself to the
changing environment in the shipbuilding sector.
Of Koreas big-three shipbuilders, HHI is the most leveraged to the commercial
vessel cycle. However, we continue to believe a full-fledged recovery in the
commercial vessel cycle is distant.
Figure 122: HHI shipbuilding/offshore platform order outlook
New order 2010 2011 2012 2013E 2014E 2015E YTD % achieved
Total orders: Commercial and Offshore units 63 52 42 52 62 62 33
Drillships units
11 2 2 2 2
Semi-submersibles units
1 1 1 1 1
Tankers units 25 4 3 10 15 15 5
Bulkers units 22
4
Containers units
19 10 15 20 20 10
LNG vessels units
8 7 5 10 10 2
Others units 10 6 15 15 10 10 9
Commercial sub-total (incl. drillship) units 57 48 38 48 58 58 31
Fixed Platform/Floaters units 2 3 2 2 2 2 2
Subsea pipelines units 4 1 2 2 2 2 0
Offshore subtotal units 6 4 4 4 4 4 2
Total orders USD bn 7.1 15.4 8.2 13.4 13.5 13.7 12.4 93%
Commercial vessels (incl. drillships) USD bn 4.1 10.9 6.1 7.4 7.5 7.7 6.8 91%
Offshore USD bn 3.1 4.5 2.1 6.0 6.0 6.0 5.7 94%
Source: Company, Standard Chartered Research estimates
Valuation
In-Line rating, with a 12-month price target of KRW 280,000
We value HHI by applying EV/backlog and EV/EBITDA methodologies, then
averaging them.
Our price target of KRW 280,000 implies 23.4x 2014E PER and 1.0x 2014E PBR.
We believe the current share price has fully reflected HHIs ROE accretion potential.
Based on EV/backlog, fair value is KRW 307,000.
Based on EV/EBITDA, fair value is KRW 253,000.
Commercial vessel-centric
Equity Research l Korea shipbuilding
10 October 2013 65
EV/backlog
We apply a target operational EV/backlog of 41%, its mid-cycle EV/backlog multiple
during the 2009-11 upturn (before the Hyundai Oilbank acquisition). We have found
no clear evidence that HHIs portfolio or business model have change since the last
cycle.
While the EV/backlog valuation methodology is appropriate for deriving the intrinsic
value of order-driven businesses (such as construction and shipbuilding), it is
inappropriate for the companys oil refinery business, Hyundai Oilbank. We value this
business separately using EV/EBITDA. We apply a 2014E EV/EBITDA multiple of
8.5x on Hyundai Oilbank, the same multiple we use for S-Oil.
Figure 123: EV/backlog
(KRW bn, %)
2014E
Modified backlog (A) 64,129
Target operational EV/backlog (B) 41%
Target operational EV (C) = (A) X (B) 26,293
2014E EBITDA, Hyundai Oilbank (D) 609
Target operational EV/EBITDA (x) (E) 8.5
Target operational EV, Hyundai Oilbank (F) = (D) X (E) 5,175
Net debt (G) 8,147
Total market capitalisation (H) = (C) + (F) - (G) 23,321
Shares outstanding (mn) (I) 76
Fair value per share (H) / (I) KRW 307,000
Source: Company, Standard Chartered Research estimates
EV/EBITDA
We apply a target operational EV/EBITDA of 12.4x, its mid-cycle EV/EBITDA multiple
in 2011-2013 YTD, in valuing HHIs operations except for the oil refinery business.
Figure 124: EV/EBITDA
(KRW bn)
2014E
2014E EBITDA (A) 1,793
Target operational EV/EBITDA (x) (B) 12.4
Target operational EV (C) = (A) X (B) 22,148
2014E EBITDA, Hyundai Oilbank (D) 609
Target operational EV/EBITDA (x) (E) 8.5
Target operational EV, Hyundai Oilbank (F) = (D) X (E) 5,175
Net debt (G) 8,147
Total market capitalisation (H) = (C) + (F) - (G) 19,176
Shares outstanding (mn) (I) 76
Fair value per share (H) / (I) KRW 253,000
Source: Company, Standard Chartered Research estimates
Equity Research l Korea shipbuilding
10 October 2013 66
Figure 125: Historical EV/backlog trend Figure 126: Historical EV/EBITDA trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
Figure 127: HHI EV/modified backlog Figure 128: HHI EV/EBITDA
Source: Company, Bloomberg, Standard Chartered Research estimates Source: Company, Bloomberg, Standard Chartered Research estimates
Figure 129: Historical PBR trend Figure 130: Historical PER trend
Source: Company, Standard Chartered Research estimates Source: Company, Standard Chartered Research estimates
Potential risks
HHI has a diversified business portfolio. We have factored our bearish view on
regional refineries into HHIs oil refinery business (Hyundai Oilbank). Unexpected oil
price movements and strong gross refining margins are potential risks to our
estimates.
0%
10%
20%
30%
40%
50%
60%
70%
80%
2001 2003 2005 2007 2009 2011 2013
E
V
/
m
o
d
i
f
i
e
d
b
a
c
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l
o
g
0
2
4
6
8
10
12
14
2001 2003 2005 2007 2009 2011 2013
E
V
/
E
B
I
T
D
A
(
x
)
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRW bn) x0.29 x0.37
x0.51 x0.64 x0.86
0
10,000
20,000
30,000
40,000
50,000
60,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
b
n
EV (KRW bn) x1.0 x3.0
x8.8 x11.0 x12.4
0
100,000
200,000
300,000
400,000
500,000
600,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
HHI x0.8 x1.2
x1.6 x2.0 x2.4
0
100,000
200,000
300,000
400,000
500,000
600,000
2001 2003 2005 2007 2009 2011 2013
K
R
W
HHI x3.0 x8.0
x13.0 x18.0 x23.0
Equity Research l Korea shipbuilding
10 October 2013 67
Source: Company, Standard Chartered Research estimates
Income statement (KRW bn) Cash flow statement (KRW bn)
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Sales 53,712 54,974 55,282 56,603 57,061 EBIT 4,536 1,993 1,242 1,437 1,751
Gross profit 6,927 4,643 4,029 4,135 4,560 Depreciation & amortisation 938 1,007 974 965 954
SG&A (2,391) (2,650) (2,787) (2,698) (2,808) Net interest 70 (606) (527) (626) (724)
Other income 0 0 0 0 0 Tax paid 0 0 0 0 0
Other expenses 0 0 0 0 0 Changes in working capital (3,449) (7,466) 1,675 (272) (514)
EBIT 4,536 1,993 1,242 1,437 1,751 Others (5,040) (5,853) 1,764 (147) (375)
Net interest (52) (214) (192) (225) (273) Cash flow from operations 504 (3,459) 3,453 1,630 1,606
Associates (148) (369) (19) (5) (5)
Other non-operational (247) (987) 786 0 0 Capex (1,627) (1,090) (1,142) (1,297) (1,297)
Exceptional items (212) 1,013 (803) 0 0 Acquisitions & Investments 0 0 0 0 0
Pre-tax profit 3,876 1,436 1,014 1,207 1,472 Disposals 0 0 0 0 0
Taxation (1,133) (1,215) (245) (292) (365) Others 260 281 (113) (117) (121)
Minority interests (184) (36) 8 (46) (57) Cash flow from investing (1,367) (809) (1,255) (1,413) (1,417)
Exceptional items after tax 0 0 0 0 0
Net profit 2,559 184 776 868 1,050 Dividends (429) (245) (245) (245) (245)
Issue of shares (50) 156 0 0 0
Net profit adj. 2,559 184 776 868 1,050 Change in debt 1,059 2,567 236 (463) (463)
EBITDA 5,473 3,000 2,217 2,402 2,705 Other financing cash flow 14 1,287 44 45 47
Cash flow from financing 594 3,766 35 (663) (661)
EPS (KRW) 33,671 2,421 10,216 11,426 13,821
EPS adj. (KRW) 33,671 2,421 10,216 11,426 13,821 Change in cash (269) (502) 2,233 (447) (472)
DPS (KRW) 7,000 4,000 4,000 4,000 4,000 Exchange rate effect 0 0 0 0 0
Avg fully diluted shares (mn) 76 76 76 76 76 Free cash flow (1,123) (4,549) 2,311 333 310
Balance sheet (KRW bn) Financial ratios and other
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Cash 1,610 1,108 3,341 2,894 2,422 Operating ratios
Short-term investments 2,310 2,356 2,356 2,356 2,356 Gross margin (%) 12.9 8.4 7.3 7.3 8.0
Accounts receivable 9,745 12,785 13,821 14,151 14,265 EBITDA margin (%) 10.2 5.5 4.0 4.2 4.7
Inventory 6,478 6,191 5,695 5,523 5,526 EBIT margin (%) 8.4 3.6 2.2 2.5 3.1
Other current assets 2,290 2,839 3,214 3,330 3,396 Net margin adj. (%) 4.8 0.3 1.4 1.5 1.8
Total current assets 23,076 25,279 28,427 28,254 27,966 Effective tax rate (%) 29.2 84.7 24.2 24.2 24.8
Sales growth (%) 43.8 2.3 0.6 2.4 0.8
PP&E 15,565 12,956 13,224 13,656 14,099 Net income growth (%) -38.4 -92.8 321.9 11.8 21.0
Intangible assets 2,324 2,224 2,124 2,024 1,924 EPS growth (%) -38.4 -92.8 321.9 11.8 21.0
Associates and JVs 973 904 884 879 873 EPS growth adj. (%) -38.4 -92.8 321.9 11.8 21.0
Other long-term assets 7,063 7,911 8,025 8,141 8,262 DPS growth (%) 109.1 -42.9 0.0 0.0 0.0
Total long-term assets 25,924 23,995 24,256 24,699 25,158
Efficiency ratios
Total assets 49,001 49,273 52,683 52,953 53,124 ROE (%) 14.9 0.9 3.8 4.2 4.9
ROCE (%) 20.5 7.9 4.6 5.3 6.2
Short-term debt 22,229 20,323 22,852 22,307 21,462 Asset turnover (x) 1.1 1.1 1.1 1.1 1.1
Accounts payable 15,016 11,523 13,852 13,807 13,462 Op. cash/EBIT (x) 0.1 -1.7 2.8 1.1 0.9
Other current liabilities (11,754) (9,672) (10,974) (10,874) (10,503) Depreciation/capex (x) 0.5 0.8 0.8 0.7 0.7
Total current liabilities 25,491 22,174 25,730 25,241 24,421 Inventory days 44.9 45.9 42.3 39.0 38.4
Accounts receivable days 67.8 74.8 87.8 90.2 90.9
Long-term debt 2,938 3,900 3,927 3,954 3,982 Accounts payable days 118.8 96.2 90.4 96.2 94.8
Convertible bonds 0 0 0 0 0
Deferred tax 1,340 1,471 1,515 1,560 1,607 Leverage ratios
Other long-term liabilities 1,055 1,017 1,043 1,069 1,096 Net gearing (%) 129.6 111.6 114.5 110.6 104.6
Total long-term liabilities 5,334 6,388 6,484 6,584 6,685 Debt/capital (%) 107.0 89.4 99.4 94.8 88.6
Interest cover (x) 15.7 5.1 3.7 3.6 3.6
Total liabilities 30,824 28,562 32,214 31,824 31,106 Debt/EBITDA (x) nm 8.2 11.5 11.0 9.6
Current ratio (x) 0.9 1.1 1.1 1.1 1.1
Shareholders funds 18,177 20,712 20,469 21,129 22,018
Minority interests 0 0 0 0 0 Valuation
EV/sales (x) 1.0 0.8 0.8 0.8 0.8
Total equity 18,177 20,712 20,469 21,129 22,018 EV/EBITDA (x) 9.7 14.5 19.7 18.2 16.0
EV/EBIT (x) 11.8 21.8 35.2 30.4 24.7
Total liabilities and equity 49,001 49,273 52,683 52,953 53,124 PER (x) 11.8 109.6 26.1 23.4 19.3
PER adj. (x) 11.8 109.6 26.1 23.4 19.3
Net debt (cash) 23,557 23,115 23,438 23,367 23,022 PBR (x) 1.1 0.9 1.0 1.0 0.9
Year-end shares (mn) 76 76 76 76 76 Dividend yield (%) 1.8 1.5 1.5 1.5 1.5
Equity Research l Korea shipbuilding
10 October 2013 68
Disclosures appendix
The information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank Singapore Branch, Standard
Chartered Securities (India) Limited, Standard Chartered Securities Korea Limited and/or one or more of its affiliates (together with its group of companies, SCB)
and the research analyst(s) named in this report. THIS RESEARCH HAS NOT BEEN PRODUCED IN THE UNITED STATES.
Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and
attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other
subject matter as appropriate; and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views
contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.
Where disclosure date appears below, this means the day prior to the report date. All share prices quoted are the closing price for the business day prior to the
date of the report, unless otherwise stated.
23,000
28,290
33,580
38,870
44,160
49,450
Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13
KRW Recommendation and price target history for Samsung Heavy Industries
Date Recommendation Price target Date Recommendation Price target Date Recommendation Price target
Source: FactSet prices, SCB recommendations and price targets
176,000
250,200
324,400
398,600
472,800
547,000
Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13
KRW Recommendation and price target history for Hyundai Heavy Industries
Date Recommendation Price target Date Recommendation Price target Date Recommendation Price target
Source: FactSet prices, SCB recommendations and price targets
20,050
25,610
31,170
36,730
42,290
47,850
Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13
KRW Recommendation and price target history for Daewoo Shipbuilding & Marine Engineering
Date Recommendation Price target Date Recommendation Price target Date Recommendation Price target
Source: FactSet prices, SCB recommendations and price targets
Recommendation Distribution and Investment Banking Relationships
Equity Research l Korea shipbuilding
10 October 2013 69
% of covered companies
currently assigned this rating
% of companies assigned this rating with which SCB has provided
investment banking services over the past 12 months
OUTPERFORM 54.1% 14.5%
IN-LINE 34.2% 13.6%
UNDERPERFORM 11.7% 8.2%
As of 30 September 2013
Research Recommendation
Terminology Definitions
OUTPERFORM (OP) The total return on the security is expected to outperform the relevant market index by 5% or more over the next 12 months
IN-LINE (IL)
The total return on the security is not expected to outperform or underperform the relevant market index by 5% or more over the next
12 months
UNDERPERFORM (UP) The total return on the security is expected to underperform the relevant market index by 5% or more over the next 12 months
SCB uses an investment horizon of 12 months for its price targets.
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Equity Research l Korea shipbuilding
10 October 2013 70
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