---
endpoint: analytics
pattern: Capital Goods
status: done
latency_ms: 185919
conversation_id: 6ff8dad7-61a1-412b-b8a6-ee8fb3e25b28
citations: 12
created: 2026-05-31 21:30:00Z
---

# What is the investment thesis for HD Hyundai Heavy in the current market environment?

# HD Hyundai Heavy Industries (329180.KS) — Investment Thesis

**CLSA Rating: High-Conviction Outperform | Target Price: ₩613,000 (EV/backlog 0.7x on 2026CL) | Top sector pick within Korea shipbuilding**

The CLSA shipbuilding team (Dong Cheol Shin / Joshua Kim) maintains HD Hyundai Heavy as their **sector top pick** with a High-Conviction Outperform rating across a sequence of notes from the "Anchors Aweigh" initiation (11 May 2025) through the most recent domestic marketing feedback (15 June 2025). The thesis has held up against subsequent earnings — Q1 2026 operating profit landed at **KRW 905.4B vs. FactSet consensus KRW 763.4B** (a 19% beat) [10], and April 2026 monthly revenue ran **KRW 2.176T vs. KRW 1.419T a year earlier** (+53% YoY) [11]. The stock has been a serial 52-week-high name, touching **KRW 718,000 in May 2026, +79% over the prior 52 weeks** [12].

---

## 1. Core Thesis — Cyclical → Structural Transition

CLSA's central argument is that Korean shipbuilding is **transitioning from a classic cyclical business to a structural one**, anchored by three persistent demand pillars that should keep the supply-demand imbalance in place over the mid-term [1]:

| Demand pillar | What it drives | Why it sticks |
|---|---|---|
| **Marine decarbonisation** | Replacement of ageing global fleet with LNG-fuelled / dual-fuel vessels | IMO regulation cycle; not optional |
| **US LNG export terminal start-ups** | LNGC (LNG carrier) newbuild orders | Multi-year terminal build-out; LNG long-term contract nature insulates LNGC demand even if spot LNG over-supplies [7] |
| **US naval vessel orders to Korea** | Highest-value, highest-margin opportunity | US Navy 30-year shipbuilding plan + delayed domestic yard capacity; HD HHI capacity reaches **6 surface + 2 submarines per year by 2027** [8] |

CLSA expects **margin expansion over the next two years**, because high-value vessel contracts were locked in at favourable prices during a seller's market, and the seller's market should continue [1]. Order flow timing: **2H25 start, 1H26 meaningful ramp** [6].

---

## 2. Why HD HHI Specifically (vs. Samsung Heavy / Hanwha Ocean)

CLSA's explicit ranking: **HD HHI is the lead vehicle** for the sector narrative because [3][7]:

- **Largest shipbuilder in the world by capacity** — the leading stock historically carried a premium during the last upcycle, and CLSA expects the same again [3].
- **Widest product portfolio among peers** — gives HD HHI exposure to *all three* positive narratives (decarbonisation + LNG + naval + engine shortages), whereas Hanwha Ocean is concentrated in naval and Samsung Heavy in FLNG [3].
- **Scalability** — investors specifically cite scale as the reason for preferring HD Hyundai group names over Hanwha Ocean, where valuations are already viewed as stretched [1].

Domestic investor positioning (CLSA's June 2025 marketing canvass): **sector overweight is consensus, HD HHI is the preferred way to play it**; investors expect stronger 2H25 performance and view FX / cost concerns as manageable against structural margin growth [1].

---

## 3. Coverage Table (CLSA, 15 June 2025)

| Company | Ticker | Target Price | Rating |
|---|---|---|---|
| **HD Hyundai Heavy** | 329180.KS | **₩613,000 / ₩105,000 (proxy)** | **High-Conviction OPF** |
| Samsung Heavy | 010140.KS | OPF | OPF |
| Hanwha Ocean | 042660.KS | OPF | OPF |
| HD Hyundai Mipo | 010620.KS | OPF | OPF |

*Note: Target price of ₩613,000 confirmed in valuation chunks [5][7]; the alternative numbers shown in the coverage-page TABLE chunk appear to be OCR mis-reads of the proxy ticker fields [2].*

---

## 4. Valuation Framework — Why HD HHI Trades at a Premium Multiple

CLSA values HD HHI on **EV/backlog**, applying a **0.7x target multiple to 2026CL backlog** [3]:

- That 0.7x is a **30% discount to the 1.0x peak** the legacy Hyundai Heavy received during the 2005–10 upcycle, reflecting the HD HSHI carve-out at the time of HD HHI's 2022 IPO [3].
- The multiple is **higher than Samsung Heavy (0.4x) and Hanwha Ocean (0.45x peer follower multiples)** for two reasons: (a) HD HHI is the largest builder and traded at a leader premium last cycle; (b) widest product breadth captures the full sector narrative [3].

As of mid-May 2025, HD HHI traded at **0.53x 1-yr forward EV/backlog vs. the 0.7x target — implying ~46% upside** to the ₩613,000 TP. CLSA argued the rerating would arrive "once it starts to receive the spotlight on US naval orders, in which Hanwha Ocean has been receiving all the credit for" [5].

The Q1 2026 beat ([10]) and 52-week-high run-up to ~₩716,000 [12] suggest the spotlight rotation thesis has begun to play out — the stock has now passed the original ₩613,000 target and is trading on the next leg of estimate/TP revisions.

---

## 5. Recent Stock Behaviour (Mar–May 2026)

The stock confirms the rerating thesis in price action:

- **27 Apr 2026**: New 52-week high at **KRW 668,000** [12]
- **29 Apr 2026**: New 52-week high at **KRW 685,000** [12]
- **7 May 2026**: Q1 2026 operating profit **KRW 905B (+19% vs. consensus)** [10]
- **8 May 2026**: Pullback to ~KRW 650,000 on Strait of Hormuz geopolitics
- **12 May 2026**: New 52-week high at **KRW 716,000–718,000 (+79% YoY)** [12]
- **20 May 2026**: April single-month revenue **KRW 2.18T vs. KRW 1.42T (+53% YoY)** [11]

---

## 6. Key Risks (per CLSA)

| Risk | Mechanism | CLSA mitigation |
|---|---|---|
| **US naval narrative disappoints** | Naval orders come in lower than expected OR the legislative bill allowing US naval newbuilds at overseas yards fails to pass | "Speed-to-launch" is critical for US; foreign-threat dynamics and delayed domestic capacity force the Navy to look to Korea [4][9] |
| **LNG oversupply from US terminals** | Terminal openings could over-supply LNG spot market and depress LNGC demand | Long-term contract structure of LNG + diversifying trade routes insulates carrier demand [4][7] |
| **Investment-caution designation overhangs** (May 2025) | KRX "investment caution" label can suppress price action | Historically share prices fully recover by end of the 10-trading-day designation period [9] |
| **EB exercise / HD KSOE share sell-off** | Parent HD KSOE's exchangeable-bond holders sold HD HHI shares | One month of EB exercise had **no measurable price impact** — overhang deemed extinguished [9] |

---

## Bottom Line

HD Hyundai Heavy is CLSA's preferred way to play a **secular re-rating in Korean shipbuilding** powered by US LNG, US naval defense onshoring, and IMO-driven decarbonisation. The combination of largest scale, broadest product portfolio, and 30%-discounted but still premium EV/backlog multiple gives it both the most beta to sector tailwinds AND the highest fair-value ceiling among peers. The Q1 2026 19% earnings beat [10] and follow-through April revenue print of +53% YoY [11] validate the margin-expansion leg of the thesis; the share price has already moved through CLSA's ₩613,000 target [5] to new 52-week highs of ₩716,000+ [12]. Forward catalysts to watch: (i) actual US naval contract awards (CLSA expects meaningful flow from 1H26), (ii) LNG terminal commissioning dates, and (iii) passage of the US foreign-builder legislation.

---

**Sources**
[1] Korea shipbuilding (Domestic marketing feedback) — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF
[2] Coverage Table — Korea shipbuilding — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF
[3] Valuation details, HD HHI — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF
[4] Investment risks, HD HHI — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF
[5] EV/backlog and 46% upside table — Korea shipbuilding (Addressing recent concerns) — CLSA (18 May 2025) — 607959768LinqAlpha.PDF
[6] Maintain positive view, HD HHI top pick — Korea shipbuilding (Marketing feedback) — CLSA (26 May 2025) — 607960544LinqAlpha.PDF
[7] Reasons to remain bullish — Korea shipbuilding (Addressing recent concerns) — CLSA (18 May 2025) — 607959768LinqAlpha.PDF
[8] Naval shipyard capacity build-out table — CLSA (18 May 2025) — 607959768LinqAlpha.PDF
[9] HD Hyundai Heavy - HC O-PF (Price check) — investment caution and EB overhang analysis — CLSA (21 May 2025) — 607960163LinqAlpha.PDF
[10] StreetAccount — HD Hyundai Heavy reports Q1 OP KRW 905.4B vs FactSet KRW 763.4B (7 May 2026)
[11] StreetAccount — HD Hyundai Heavy April revenue KRW 2.176T vs prior-year KRW 1.419T (20 May 2026)
[12] StreetAccount — Asian stocks reaching new 52-week highs (12 May 2026)

## Citations

- [1] **607962023LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962023LinqAlpha.PDF>
- [2] **607962023LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962023LinqAlpha.PDF>
- [3] **607962023LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962023LinqAlpha.PDF>
- [4] **607962023LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962023LinqAlpha.PDF>
- [5] **607959768LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959768LinqAlpha.PDF>
- [6] **607960544LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960544LinqAlpha.PDF>
- [7] **607959768LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959768LinqAlpha.PDF>
- [8] **607959768LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959768LinqAlpha.PDF>
- [9] **607960163LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960163LinqAlpha.PDF>
- [10] **HD Hyundai Heavy Industries Co. reports Q1 operating profit KRW905.40B vs FactSet KRW763.39B** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4664054&_doc_date=2026-05-07&_doc_product=SA>
- [11] **HD Hyundai Heavy Industries Co. reports April revenue KRW2.176T vs year-ago KRW1.419T** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4687715&_doc_date=2026-05-20&_doc_product=SA>
- [12] **StreetAccount Summary: Asian stocks reaching new 52-week highs/lows** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4673880&_doc_date=2026-05-12&_doc_product=SA>

