"Record earnings — and then I looked at the share price and was shocked." — investor
Despite record earnings, HD Hyundai Heavy Industries' share price has been cut roughly in half from its peak. The shipbuilder had shaken off years of sluggishness and appeared to be entering a full-blown boom cycle, but investors who had expected a sustained rally are now bewildered.
The stock has instead fallen sharply. Shares that once approached 800,000 won have stalled in the 400,000 won range.
On Wednesday, HD Hyundai Heavy Industries closed at 444,000 won, down 2.52 percent from the previous session. Securities firms have set price targets as high as 1 million won for the stock, yet it continues to slide.
With the share price failing to recover despite strong results, investors have been vocal in their frustration, saying they should have bought Samsung Electronics or SK hynix instead.
Adding to the pressure, a labor dispute over performance bonuses has intensified, pushing the union into a series of partial strikes. The HD Hyundai Heavy Industries union, which is demanding that at least 30 percent of operating profit be shared with workers, staged four-hour strikes on Sept. 11 and over Sept. 14-15, then extended the walkout to seven hours on Friday. After the Chuseok holiday, the union has signaled it will escalate further, including joining a joint strike with the shipbuilding industry union coalition.
Management put forward a third proposal on Sept. 10, offering a flat monthly base-pay increase of 110,000 won ($81) along with a 10 million won incentive bonus plus a 200 percent payout, but the union rejected it. The union is holding out for a 149,600 won base-pay increase, a 100 percent raise in bonuses and a 30 percent share of operating profit.
Given the sequential nature of shipbuilding production, a prolonged strike risks pushing back delivery schedules, imposing significant costs from construction delays. There are also concerns that the dispute could hurt the company's competitiveness in winning new orders.
Shinyoung Securities has set a price target of 1 million won for HD Hyundai Heavy Industries, reflecting the strong earnings expected during the shipbuilding boom. The gap between that target and the current share price, however, remains wide.
HD Hyundai Heavy Industries posted sales of 6.33 trillion won ($4.66 billion) and operating profit of 1.04 trillion won in the second quarter of this year, up 52.7 percent and 120.6 percent, respectively, from the same period a year earlier. Analysts note that while the merger with HD Hyundai Mipo provided a base effect, rising profit margins in non-shipbuilding segments such as offshore and engine machinery have been the main driver of overall earnings improvement. The strong results have raised expectations for greater shareholder returns, including expanded dividends, though wage negotiations with the union remain a key variable.
Meanwhile, among the three major domestic shipbuilders, Samsung Heavy Industries is the only one to have wrapped up its wage talks. HD Hyundai Heavy Industries and Hanwha Ocean have both continued striking, unable to bridge differences over wages and performance bonuses. With order backlogs piling up, concerns over production disruptions and delivery delays are mounting.
park@heraldcorp.com
