---
endpoint: analytics
pattern: Capital Goods
status: done
latency_ms: 215842
conversation_id: 6465d78b-c123-4c8e-8909-05de2a6e9e73
citations: 17
created: 2026-05-31 21:31:41Z
---

# How does HD Hyundai Heavy’s valuation compare to peers, and what justifies its premium/discount?

# HD Hyundai Heavy (329180 KS) — Valuation vs. Peers and the Premium/Discount Drivers

## 1. Where HD HHI Sits in the Peer Group

CLSA values the Korean shipbuilders on a forward **EV / 2026 backlog** framework, with each yard assigned a different target multiple. As of the 15 June 2025 marketing-feedback note, the coverage stack and ratings were [13]:

| Stock | Ticker | Rating | Mkt cap (US$) | Price (₩) | Target (₩) | Up/downside |
|---|---|---|---|---|---|---|
| **HD Hyundai Heavy (HD HHI)** | 329180 KS | **HC O-PF** | 27.8bn | 427,500 | 613,000 | **+43.4%** |
| HD KSOE (parent / holdco) | 009540 KS | O-PF | 18.2bn | 350,500 | 371,000 | +5.8% |
| Samsung Heavy (SHI) | 010140 KS | O-PF | 11.4bn | 17,690 | 18,300 | +3.4% |
| Hanwha Ocean | 042660 KS | HLD | 19.0bn | 84,700 | 84,000 | -0.8% |

**Target EV/backlog multiples**:

| Stock | Target multiple | Anchored to |
|---|---|---|
| **HD HHI** | **0.7x** | 30% discount to old HHI's 1.0x prior-cycle peak [1] |
| Samsung Heavy | 0.4x | Peak follower multiple in 2010–11 [7][8] |
| Hanwha Ocean | 0.45x | 10% premium to the 0.4x follower peak [6] |
| HD KSOE | SOTP | 0.7x HHI + 0.4x HSHI/Mipo, then 60% holdco NAV discount [9][14] |

On forward multiples, HD HHI also screens richest on book value but earns it on returns [2]:

| Metric (25CL / 26CL / 27CL) | HD HHI | SHI | HD KSOE | Hanwha Ocean |
|---|---|---|---|---|
| **P/B (x)** | **5.4 / 4.4 / 3.6** | 3.1 / 2.6 / 2.2 | 1.6 / 1.3 / 1.0 | 4.6 / 4.0 / 3.4 |
| **ROE (%)** | **22.7 / 25.9 / 25.4** | 13.0 / 19.6 / 22.0 | 20.7 / 23.6 / 23.1 | 12.4 / 14.6 / 16.7 |
| EPS growth (%) | 129.9 / 39.2 / 19.7 | 719.0 / 73.4 / 33.7 | 108.4 / 37.2 / 22.9 | 20.1 / 32.9 / 34.0 |
| TSR to target (%) | +45 | +24 | +34 | +5 |

## 2. The Premium HD HHI Receives vs. Peers — Why 0.7x vs. 0.4–0.45x

CLSA explicitly justifies pricing HD HHI **above** Samsung Heavy and Hanwha Ocean on two grounds [1]:

1. **Scale / industry leadership.** HD HHI is the world's largest shipbuilder. In the prior 2007–12 upcycle, the pre-spinoff Hyundai Heavy Industries traded at a **~2x premium** to the followers (DSME / SHI) for its scalability and portfolio diversity [3]. CLSA expects the leader-vs-follower spread to persist this cycle.
2. **Widest product portfolio.** HD HHI plays into multiple structural narratives simultaneously — decarbonisation (LNGC, ammonia, LPG, dual-fuel engines), US naval-vessel orders, and global engine shortages [1][4]. The orderbook composition makes this concrete: across HD Hyundai vs. peers, HD Hyundai leads on LNGC (85 units), containers (85), ammonia/LPG (32) and LPG (59), whereas SHI and Hanwha are skewed to LNGC/tankers and lack the broader mix [17].
3. **Engine expertise.** HD HHI has a unique engine franchise (HD Hyundai Engine / HSD) feeding into both internal and external shipbuilder demand at a moment of capacity shortage — a margin lever the others don't have [4].
4. **Naval-rerating optionality.** Hanwha Ocean has been the market's preferred US-naval play through 1H25 and its valuation has already "stretched" past prior-cycle highs; HD HHI, with stronger drydock build capacity and track record (Philippine Navy frigates/patrol vessels, KDX-III Batch-II destroyers), has **not yet** received the same naval premium, leaving rerating headroom [5][3].

## 3. The Discount HD HHI Carries vs. Its Own Past — Why 0.7x vs. 1.0x

The "premium vs. peers / discount vs. self" tension is the core of the methodology [3]:

- In the previous cycle, the **old Hyundai Heavy Industries peaked at 1.0x 12-month forward EV/backlog**, with a 0.5–1.0x trading range.
- After the 2022 carve-out, today's listed HD HHI **does NOT include HD Hyundai Samho Heavy (HD HSHI)**, which now sits under HD KSOE. HSHI's earnings are roughly the same size as HD HHI's standalone earnings as of 2024, so the carve-out removed a meaningful chunk of scale and margin contribution.
- CLSA therefore applies a **30% discount** to the prior peak, giving the 0.7x target — described as preserving "franchise value and leadership in core operations" while recognising the reduced single-entity scale [5].

Applied to the 2026CL backlog of **₩69.3tn** at 0.7x, the math walks down to a **₩613,000 target price** (45% upside at initiation), with a clear glide path from ₩366k (2024 backlog) → ₩503k (25CL) → ₩613k (26CL) as the orderbook builds [16].

## 4. The Peer Detail — What Justifies Each Stock's Multiple

**Samsung Heavy (SHI) — 0.4x, the cleanest "follower peak"** [7][8]
- LNG pure play: dominant in floating LNG (FLNG, 20%+ OPM projects) and a top-3 LNGC supplier.
- No defence exposure has caused SHI to trade at a discount since end-2024, but CLSA argues the LNG earnings certainty actually deserves the **full follower-peak multiple** (0.4x), not less. SHI is therefore "undervalued relative to peers" and is CLSA's **second pick after HD HHI**.

**Hanwha Ocean — 0.45x, a 10% premium to followers but priced for perfection** [6][11]
- A 10% premium to 0.4x is awarded for first-mover lead in US Navy MRO (Philly Shipyard acquisition, two USNS contracts won — Wally Schirra, Yukon) and submarine exports.
- But the share price has run hard on the defence narrative and is now near prior-cycle peaks, so CLSA rates it **HLD** despite assigning a peer-premium multiple — the rally has fully discounted the optionality.

**HD KSOE (parent) — SOTP, suffers from a 60% holdco discount on listed subs** [9][14][15]
- Values HD HHI at 0.7x, HD HSHI and HD Hyundai Mipo at 0.4x, then applies a **60% NAV discount on the listed pieces (HHI, Mipo)** and only 10% on the private HSHI.
- Currently trades at a **63% NAV discount** — high vs. the ~mid-40% average for Korean conglomerates [15] — which CLSA argues should compress on Value-up reform, 6% yield and 13% OPM. Two structural drags keep KSOE rated O-PF rather than HC O-PF: (i) classic holdco discount perception, and (ii) potential HSHI IPO overhang (an HSHI IPO was attempted in 2023 and pulled when valuations disappointed) [10].

## 5. Domestic Investor Read-Through

CLSA's June 2025 marketing feedback corroborates the framework. Korean institutional investors were broadly sector-overweight, with preference tilted toward **HD Hyundai-group names (HD HHI especially for scale) and Samsung Heavy**, with "little interest in Hanwha Ocean due to its valuation" — consistent with the CLSA HLD on Hanwha and HC O-PF on HD HHI [12]. HD HHI is positioned as the "leading stock" given the widest portfolio exposure to current positive narratives [15].

## 6. Synthesis — What Actually Justifies HD HHI's Premium

The HD HHI valuation case sits on three intersecting axes [1][3][4][5][10][17]:

- **vs. SHI / Hanwha (peer premium, 0.7x vs. 0.4–0.45x)**: justified by scale, portfolio breadth across all four structural themes (LNG / decarb / naval / engines), engine franchise, and historical leader status; reinforced by superior forward ROE (22.7 → 25.4%) vs. peers in the 12–22% range.
- **vs. its own pre-spinoff history (self discount, 0.7x vs. 1.0x)**: justified by the HSHI carve-out removing ~half of pre-split earnings — the leader premium remains but at lower absolute scale.
- **vs. Hanwha's naval-driven rerate (naval-premium gap)**: HD HHI has the capability and track record but hasn't yet received the rerating Hanwha has — making it CLSA's *risk-reward* pick (HC O-PF, 45% TSR) over Hanwha (HLD, 5% TSR).

The premium HD HHI commands is **earned on scale + ROE + thematic breadth**; the discount it carries vs. itself is **technical** (carve-out math). Within Korean shipbuilding, HD HHI is the only name where peer-relative premium AND prior-cycle-relative discount both compound into an attractive target multiple — which is why it sits at the top of CLSA's order of preference [10].

---

**Sources**
[1] Korea shipbuilding (Domestic marketing feedback) — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF
[2] Korea shipbuilding (Anchors aweigh: Answering the call for US LNG and naval ship demand) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF
[3] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (Pre-spinoff peer premium)
[4] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (HD HHI initiation rationale)
[5] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (HD HHI naval premium gap)
[6] Korea shipbuilding (Addressing recent concerns) — CLSA (18 May 2025) — 607959768LinqAlpha.PDF (Hanwha Ocean 0.45x)
[7] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (SHI initiation)
[8] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (Order of preference — SHI rationale)
[9] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (HD KSOE SOTP table)
[10] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (Order of preference summary)
[11] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (Hanwha Ocean 10% premium)
[12] Korea shipbuilding (Domestic marketing feedback) — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF (Investor positioning)
[13] Korea shipbuilding (Domestic marketing feedback) — CLSA (15 Jun 2025) — 607962023LinqAlpha.PDF (Coverage prices and TPs)
[14] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (HD KSOE SOTP methodology)
[15] HD KSOE - O-PF (Parent pressure, payout potential) — CLSA (8 Jun 2025) — 607961471LinqAlpha.PDF (NAV discount)
[16] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (HD HHI EV/backlog walk to ₩613k)
[17] Korea shipbuilding (Anchors aweigh) — CLSA (11 May 2025) — 607949990LinqAlpha.PDF (Backlog composition: HD Hyundai vs. peers)

## Citations

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