"Record-breaking earnings, yet the share price has fallen harder than Samsung Electronics or SK Hynix," one investor said.
HD Hyundai Heavy Industries has shaken off years of sluggishness and entered a full-blown boom cycle, but despite posting record earnings its share price has been cut roughly in half from its peak, leaving investors stunned.
Shares that had climbed to nearly 800,000 won have since tumbled into the 300,000 won range.
On Friday, HD Hyundai Heavy Industries fell against the broader market recovery, closing at 351,500 won. Adding to the pressure, the company's union announced a seven-hour partial strike involving all members, scheduled for Wednesday through Friday of next week.
According to the company's labor and management, the union convened its central dispute committee that day and finalized the strike plan. Labor and management had reached a tentative agreement on Sept. 30 centered on a 120,000 won raise in base pay and a bonus payment of 200 percent plus 11 million won. However, union members voted down the agreement in a ratification ballot.
Earlier, the union had called for a 149,600 won increase in base pay, a 100 percent raise in bonuses and a 30 percent share of operating profit.
Investors are growing increasingly anxious as the HD Hyundai Heavy Industries union hardens its strike stance.
Given shipbuilding's sequential production processes, a prolonged strike could delay delivery schedules and impose significant costs from construction delays. Analysts also warn it could hurt the company's competitiveness in winning new orders.
Analysts had previously set target prices for HD Hyundai Heavy Industries as high as 1 million won, reflecting strong earnings expectations during the shipbuilding boom.
In the second quarter of this year, HD Hyundai Heavy Industries posted sales of 6.33 trillion won and operating profit of 1.04 trillion won, up 52.7 percent and 120.6 percent, respectively, from a year earlier. While a base effect from the merger with HD Hyundai Mipo contributed, analysts said improved profit margins in non-shipbuilding segments such as offshore and engine machinery drove the overall earnings improvement.
Strong earnings growth has raised expectations for expanded shareholder returns, including higher dividends, but the outcome of wage negotiations with the union remains a key variable.
Securities firms have begun trimming their target prices. NH Investment & Securities lowered its earnings estimates and cut its target price for HD Hyundai Heavy Industries to 700,000 won, adding that "the outcome of labor-management negotiations over performance compensation will be a variable for fourth-quarter profitability."
SK Securities also forecast that third-quarter earnings would fall short of expectations, sharply cutting its target price for HD Hyundai Heavy Industries from 970,000 won to 820,000 won.
park@heraldcorp.com
