South Korea's big 3 shipbuilders set for another blowout quarter on high-priced vessel deliveries

South Korea's three major shipbuilders — HD Hyundai Heavy Industries, Hanwha Ocean and Samsung Heavy Industries — are expected to extend their earnings improvement streak into the third quarter as revenue from high-priced vessel orders begins to be recognized in earnest. Despite headwinds from fewer working days and a weaker won-dollar exchange rate, analysts say profitability gains will continue, brightening the outlook for full-year results and the fourth quarter.

According to FnGuide, a financial data provider, all three shipbuilders are forecast to post year-on-year increases in both sales and operating profit for the third quarter. HD Hyundai Heavy Industries is expected to report quarterly sales of 6.08 trillion won ($4.49 billion) and operating profit of 1.01 trillion won, up 37.7 percent and 81.6 percent, respectively, from the same period last year, when the company posted sales of 4.42 trillion won and operating profit of 557.3 billion won. The results would mark a second consecutive quarter of operating profit exceeding 1 trillion won for HD Hyundai Heavy Industries.

Hanwha Ocean is forecast to post sales of 3.51 trillion won and operating profit of 569.5 billion won for the quarter, representing increases of 16 percent and 96.5 percent, respectively, compared with sales of 3.02 trillion won and operating profit of 289.8 billion won a year earlier. Samsung Heavy Industries is expected to report sales of 3.19 trillion won and operating profit of 347 billion won, up 21.2 percent and 45.7 percent from the year-ago figures of 2.63 trillion won in sales and 238.1 billion won in operating profit.

Third-quarter earnings faced pressure from a reduced number of working days due to summer holidays and the Chuseok holiday, as well as a decline in the won-dollar exchange rate. Analysts expect full revenue recognition from high-priced vessels to offset much of that drag. As shipbuilders increase the share of high-value vessels built under earlier contracts, the profitability improvement trend is expected to continue.

HD Hyundai Heavy Industries is forecast to post a record annual operating profit this year as revenue from previously contracted high-priced vessels is fully recognized. Analysts say the company's profitability gains reflect construction of high-value vessels — including LNG carriers secured years ago — now flowing through to its financial results.

Mirae Asset Securities said in a report that revenue recognition from orders booked since 2024, when vessel prices reached their highest levels since 2008, is expected to accelerate, on top of the merger effect with HD Hyundai Mipo. Strong earnings are likely to continue through 2028, when revenue from this year's orders begins to be fully recognized, the brokerage added. It went on to say that with global shipyard backlogs exceeding four years of work, early achievement of order targets is expected to give shipbuilders greater room to be selective and focus on higher-margin contracts.

Hanwha Ocean is expected to expand its overseas business in the special vessel segment, particularly submarines, over the medium to long term. With submarine procurement programs under way in Saudi Arabia and Greece, Hanwha Ocean is eyeing those markets as potential export opportunities. The company is also pursuing entry into the naval vessel business in the United States through the Philly Shipyard, and is expanding its participation in US Navy programs including next-generation combat logistics force vessels.

KB Securities said in a report that Hanwha Ocean is positioned to secure additional LNG carrier orders, given its delivery advantage with slots available from 2029, and that a formal contract for a 700 billion won frigate deal with the Royal Thai Navy — for which Hanwha Ocean has been named preferred bidder — could be signed before year-end. The brokerage also noted that results of the bidding process for a $3 billion Namibia floating production, storage and offloading vessel project are expected to be announced this year.

Samsung Heavy Industries is expected to be a primary beneficiary of growing orders for floating LNG production facilities. IBK Investment Securities said in a report that global LNG demand is forecast to keep rising, led by emerging economies in Asia, and that investment costs for floating LNG projects have fallen to levels comparable to onshore plants. "If floating LNG projects expand, Samsung Heavy Industries is likely to capture the bulk of the benefit," the brokerage said.

Meanwhile, the resolution of labor disputes is adding to optimism about fourth-quarter earnings across the shipbuilding industry. Samsung Heavy Industries recently concluded wage negotiations with its labor council, and HD Hyundai Heavy Industries reached a tentative agreement on wages and collective bargaining on Wednesday, bringing the major shipbuilders' labor talks to a close in quick succession.