---
endpoint: analytics
pattern: Capital Goods
status: done
latency_ms: 322916
conversation_id: 951a7895-28ab-42b4-952b-466f71dba126
citations: 9
created: 2026-05-31 20:16:28Z
---

# Provide a one‑year narrative of HD Hyundai Heavy, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# HD Hyundai Heavy Industries (329180 KS) — One-Year Narrative (May 2025 → May 2026)

Over the past 12 months HD Hyundai Heavy ("HD HHI") transitioned from a deep-cyclical industrial trading on macro headlines into a structurally-rerated, near-net-cash capital goods compounder. The story is anchored in three intertwined forces: a global shipbuilding super-cycle, Trump-era US LNG/naval policy redirecting orders away from China, and a corporate margin inflection that turned cyclical earnings into compounding profitability. The share price moved from roughly **₩410k–₩423k in May 2025 to a 52-week high of ₩718k on 12 May 2026** — a further 70–80% gain on top of the 205% rally already booked in the prior 12 months [7][17].

---

## 1. May–June 2025 — The Re-rating Frame Is Set

The starting gun for the year was CLSA's 11-May-2025 sector-wide initiation **"Anchors Aweigh: Answering the call for US LNG and naval ship demand"**, which framed Korean shipbuilding as a structural supercycle, not a cyclical bounce. The thesis: *"Uncle Sam needs a new fleet and Korean shipyards are ready to answer the call. High US demand for liquefied natural gas carriers and naval vessels and newly imposed US port fees are clearing the decks for a supercycle that favours Korea's shipbuilders"* [1].

HD HHI was made the **top sector pick** with a High-Conviction Outperform rating and ₩613,000 target price (then 45% upside), based on **0.7x 2026CL EV/backlog — a 30% discount to the prior 1.0x cycle peak** to reflect the HD Hyundai Samho carve-out [2][5]. The bull case rested on a unique product portfolio:

- World's largest shipbuilder, broadest portfolio across commercial, naval, engines [2]
- Leadership in **VLACs (Very Large Ammonia Carriers)** — the next-gen decarbonisation ship — and **35% market share in dual-fuel engines** [3]
- One of only two Korean yards (with Hanwha Ocean) **eligible for US naval contracts** [3]

The earnings ramp the broker projected was a step-change, not a beat: **Net profit ₩622bn (2024A) → ₩1,429bn (2025E) → ₩1,989bn (2026E) → ₩2,381bn (2027E)**, with **EPS growth of +130% in 2025E** and **ROE rising from 11.4% (2024) to 25.9% (2026E)**. Crucially, **net-debt/equity was forecast to flip from +42% (2023) to –48% net cash by 2026E** — a balance-sheet thesis that materially de-risked the cyclical earnings [8].

### 1a. The 20-May-2025 KRX "Investment Caution Stock" Wobble

After a parabolic 12-month run (CLSA tracked **1M +13.4% / 3M +32.6% / 12M +205% absolute, +221.5% relative to Kospi** through 21 May 2025) [7], the KRX hit HD HHI with an "Investment Caution Stock" (ICS) designation on 20 May, triggering a one-day 6% selloff. CLSA dissected the technical overhang in a 21-May follow-up titled *"Price check"*, arguing the ICS was *"the main culprit, while observations of previous cases suggest share prices fully recover by the end of the designation period, which usually takes 10 trading days"* and maintaining HC O-PF [6].

A second overhang was structural: HD KSOE's exchangeable bonds (issued 25-Feb-2025) had become exercisable on 31-Mar, granting holders the right to convert into **1.73m shares (1.95% of o/s, ~15% of float) at ₩326,700/share** — well below the prevailing ~₩400k+ price [9]. CLSA flagged 78% of the EBs were still un-exercised but argued previous tranches had been absorbed without price impact.

### 1b. Marketing Feedback — Investor Confirmation

Over the following two weeks CLSA met 20+ institutional investors. Sentiment per their 26-May *"Marketing feedback"* note was that investors *"generally agreed with the margin expansion trend, along with the US-driven structural growth story for LNGC and naval vessels"*, with higher interest specifically in HD Hyundai group names *"due to their scalability and portfolio breadth, enabling a wider set of sector narratives"*. Slight concerns: revenue/backlog upside and a softening Clarksons Newbuild Price Index — but *"positive sentiment outweighed concern"*.

### 1c. Risks Already Known

Three downside risks were flagged from day one and remained the live debate all year [4]:
1. US naval orders coming later than expected or only for low-value ships
2. US legislation (overseas naval builds) being delayed
3. LNG demand slowdown from oversupply at new US export terminals

---

## 2. June 2025 → 1H 2025 Operating Period — Backlog Builds, Korea Re-rates

By mid-June, the narrative widened from a stock call to a Korea-strategy call. CLSA's 18-Jun-2025 *"Korea strategy (Early innings of a rerating)"* placed HD HHI in the basket of marquee re-rating names alongside SK Hynix, Samsung Biologics, and KB Financial. The 03-Jun-2025 *"Jaemyung Lee, the 21st president"* note and 01-Jun *"Commercial code change key catalyst"* both flagged HD HHI as a beneficiary of the new administration's shareholder-friendly capital-markets reforms.

The 8-Jun-2025 HD KSOE note *"Parent pressure, payout potential"* highlighted that HD HHI's 75%-parent could itself become a payout vehicle if HD HHI accelerated dividends — a positive read-through given HD HHI's forecast move to deep net cash.

Operationally, by August 2025 HD HHI filed its **H1 2025 (제7기) interim report on 14 Aug 2025** as a single, freshly-rated entity — credit ratings had been **upgraded from A to A+ across all three Korean rating agencies in Feb–May 2025** (NICE 17-Feb, KIS 28-Mar, KR 08-May), an under-the-radar but important confirmation that the balance-sheet thesis was already playing out. The business mix at the half stayed **70% shipbuilding / 24% engine & machinery / ~5% offshore plant**.

---

## 3. 2H 2025 — Trump LNG Approvals and Order Concentration

The Trump catalyst arrived on schedule. On the **Q4 2025 earnings call**, KSOE IR (Ki Jeong Song) opened with the Q4 review [13] and the shipbuilding division then provided the year's defining macro update: *"following President Trump's re-election, more than 70 MTPA of new LNG projects secured final investment approval in 2025 alone, and with over 200 MTPA of additional global LNG capacity expected by 2030. LNG carrier new building demand is widely expected to increase significantly"* [11].

Within this backdrop, HD Hyundai group blew through its 2025 order target: **HHI Shipbuilding Division booked $7.886bn (125.2% of target)**, with the group total reaching $17.4bn or 116% of guidance [10]. HHI's 2025 order mix tilted strategically:
- **48 vessels at HHI parent**: 28 containers + 8 Suezmax tankers + 3 VLCCs + 4 VLACs + 2 VLGCs + 2 VLECs [10]
- Group exploited *"heightened US-China trade tensions in the first half of 2025, when preference for Chinese shipyards weakened"* — H1 was container-heavy, H2 rotated into tankers and LNGCs as demand shifted [10]

Earnings quality was strong but had one swing factor: **incentive bonuses paid out across all divisions** because actual performance overshot the initial 2025 budget (set in 2024). Management argued the bonuses were a one-off because they were sized to OP margin overshoots, but they did move into subcontractors for the first time — a structural-vs-one-off debate that took up much of the Q4 Q&A.

The **Clarkson Newbuilding Price Index ended 2025 at 184.65, down only slightly from 189.16 in 2024** [11] — vindicating CLSA's view that prices would correct only gradually thanks to deep backlogs.

---

## 4. April 2026 — The Submarine Factory Fire

The clean upcycle narrative hit a tangible operating disruption on **10 April 2026** when StreetAccount reported HD HHI had **"issued a partial work suspension order after fire at submarine factory"**, with shares closing at ₩475,000 [16]. The fire mattered because the naval/special-vessel division was the marginal value-creator in the bull thesis. Management later confirmed (on the Q4 call) that the fire had been *"smoothly resolved"* at Samho, and **special naval vessel division Q4 revenue was KRW 349.9bn (down 5.8% QoQ) with OP of KRW 22.5bn**, with management guiding the segment to recover in 2026 as Aegis destroyer #3 winds down and Philippine OPVs, Korean Coast Guard 3,000-ton patrol ships, and the Peru LCU build ramp up [12].

The fire scared investors only briefly. By **27 April the stock was already back to hitting new 52-week highs** and by 12 May 2026 it sat at ₩716,000–₩718,000, up 78.7% on a 12M basis even after the partial pullback [17].

---

## 5. Q1 2026 Print and the Final Leg

The defining operating event of the year was the **7 May 2026 Q1 release: OP of KRW 905.40bn vs FactSet consensus KRW 763.39bn (range KRW 660–864bn)** — a clean 19% beat against the high end of analyst expectations [15]. The stock closed at **KRW 687,000 (+5.7% on the day to +39,000)** as that beat re-anchored 2026 estimates higher.

Two weeks later on **20 May 2026, HD HHI disclosed April monthly revenue of KRW 2.176T vs KRW 1.419T year-ago — a ~53% YoY jump** with the share at KRW 636,000 [14], confirming that the revenue ramp embedded in the original CLSA thesis (₩16.7tn 2025E → ₩18.4tn 2026E) was tracking ahead.

Sentiment did briefly cool: on **14 May 2026 the stock fell 7.4% to KRW 679,000 on consolidation** after being +11.4% in three sessions [18] — a healthy positioning unwind, not a thesis change, with peer HD HYUNDAI Co. simultaneously down 6.9% in sympathy.

---

## 6. Valuation Evolution

| Snapshot | Share Price | Implied Move | Catalyst |
|---|---|---|---|
| May 2023 | ~₩100,000 | baseline | Pre-cycle |
| May 2024 | ~₩180,000 | +80% | Cycle takes hold |
| Nov 2024 | ~₩340,000 | +240% | Trump election win, US LNG approvals |
| 21-May-2025 | ~₩398,000 (after ICS hit) | +298% | CLSA initiation; KRX caution flag |
| Apr 2026 | KRW 475,000 (post-fire) | +375% | Submarine fire dip |
| 12-May-2026 | KRW 716,000–₩718,000 | +618% | 52-week high; Q1 beat |
| 20-May-2026 | KRW 636,000 | +536% | Consolidation after monthly print |

CLSA's original ₩613,000 TP set in May 2025 was reached by early 2026 and exceeded by ~17% at the May 2026 peak. The valuation methodology of **0.7x 2026 EV/backlog** [5] now looks conservative given (a) order intake at 116% of target [10], (b) Q1 OP running 19% above consensus [15], and (c) the LNG order wave that materialised exactly as the 70+ MTPA Trump-era FID forecast laid out [11].

---

## 7. Synthesis — What Changed Investor Sentiment

The year produced a structural narrative shift across four axes:

1. **From cyclical to compounder.** Net-debt/equity moved from +42% to net cash; ROE re-rated from 11% to >25%; bonds upgraded one notch A → A+. The market stopped pricing HD HHI as a yard exposed to steel and labour shocks and started pricing it as an earnings compounder with a multi-year revenue/margin runway [8].

2. **From "Korea shipbuilding" to "US national security supplier."** The Trump LNG approvals plus US naval/Korean shipyard policy lifted the narrative ceiling. By Q4 2025, group commentary explicitly named **>70 MTPA of new LNG project FIDs in 2025 alone** as the structural driver of LNGC demand [11].

3. **From technical overhangs to clean tape.** The 20-May-2025 KRX ICS designation [6] and EB exchange overhang [9] dominated trading-desk chatter at the start of the period but proved transient — exactly as CLSA's case-study work predicted. By April–May 2026, the dominant trading tags were "new 52-week high" lists rather than caution flags [17].

4. **From thesis-on-paper to numbers-in-print.** Q1 2026 OP of ₩905.4bn (+19% vs Street) [15] and April monthly revenue +53% YoY [14] gave portfolio managers the prints they needed to mark up positions. Earnings now back the multiple rather than the multiple anticipating earnings.

### Residual Risks (Per CLSA's Original Framework [4])

- US naval order timing remains the binary swing factor — orders coming "later than expected or… for small ships with low value" can puncture the naval premium
- US legislation enabling overseas-allied naval builds was still pending at writing
- LNG oversupply risk as terminals come online and shadow-fleet sanctions evolve

The submarine factory fire on 10 April 2026 [16] was a useful reminder that operational risk is non-zero in shipyards even when the macro tape is benign. None of these risks broke the thesis this year, but they remain the gating items for the next leg.

---

**Sources**

[1] *Korea shipbuilding — Anchors aweigh* — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[2] *Korea shipbuilding — Anchors aweigh* — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[3] *Korea shipbuilding — Anchors aweigh* — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[4] *Korea shipbuilding — Anchors aweigh* (Risks) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[5] *Korea shipbuilding — Anchors aweigh* (Valuation) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[6] *HD Hyundai Heavy — HC O-PF (Price check)* — CLSA (21 May 2025) — 607960163LinqAlpha.PDF
[7] *HD Hyundai Heavy — HC O-PF (Price check)* — stock performance table — CLSA (21 May 2025)
[8] *HD Hyundai Heavy — HC O-PF (Price check)* — financials at a glance — CLSA (21 May 2025)
[9] *HD Hyundai Heavy — HC O-PF (Price check)* — EB exchange — CLSA (21 May 2025)
[10] HD Hyundai Heavy Industries — Q4 2025 earnings call (group order intake)
[11] HD Hyundai Heavy Industries — Q4 2025 earnings call (Trump LNG / market outlook)
[12] HD Hyundai Heavy Industries — Q4 2025 earnings call (Samho fire resolution, divisional commentary)
[13] HD Hyundai Heavy Industries — Q4 2025 earnings call (KSOE IR opening remarks)
[14] StreetAccount — *HD Hyundai Heavy April revenue KRW 2.176T vs YoY KRW 1.419T* (20 May 2026)
[15] StreetAccount — *HD Hyundai Heavy Q1 OP KRW 905.40B vs FactSet KRW 763.39B* (7 May 2026)
[16] StreetAccount — *Partial work suspension after fire at submarine factory* (10 Apr 2026)
[17] StreetAccount — *South Korea Stocks reaching new 52-week highs/lows* (12 May 2026; HD HHI ₩718k, +79.2% 52w)
[18] StreetAccount — *Trading higher/lower: South Korea mid-day* (14 May 2026; HD HHI –7.4% to ₩679k, consolidation)

## Citations

- [10] **HD Hyundai Heavy Industries Co.,Ltd., Q4 2025** · external
- [11] **HD Hyundai Heavy Industries Co.,Ltd., Q4 2025** · external
- [12] **HD Hyundai Heavy Industries Co.,Ltd., Q4 2025** · external
- [13] **HD Hyundai Heavy Industries Co.,Ltd., Q4 2025** · external
- [14] **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>
- [15] **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>
- [16] **HD Hyundai Heavy Industries Co. issued a partial work suspension order after fire at submarine factory** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4624532&_doc_date=2026-04-10&_doc_product=SA>
- [17] **StreetAccount Summary: South Korea Stocks reaching new 52-week highs/lows** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4673875&_doc_date=2026-05-12&_doc_product=SA>
- [18] **StreetAccount Summary - Trading higher/lower: South Korea mid-day** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4679429&_doc_date=2026-05-14&_doc_product=SA>

