KOSPIShipbuilding071970

HD-Hyundai Marine Engine

₩49,050▲ 1.76%2026-10-02 close

Market Cap

₩1.7T

Turnover

₩4.8B

Volume

100,000 shares

Shares out.

33.9M

PER

8.7×

PBR

3.3×

EPS

₩5,740

Dividend Yield

0.00%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩0 per share · Prices as of the 2026-10-02 close

Report overview

Engine margins near 24% meet the cycle debate

Since joining the HD Hyundai group, better pricing, higher utilization and a richer mix have lifted quarterly operating margins to around 24%, while debate over a shipbuilding cycle peak and China's catch-up in engines sit on the other side of the ledger.

1
In 2025 revenue reached KRW 402.4bn and operating profit KRW 75.9bn for an 18.9% operating margin, a third straight year of margin expansion from 6.3% in 2022.
2
First-quarter 2026 revenue of KRW 133.5bn with KRW 32.6bn operating profit and second-quarter revenue of KRW 128.1bn with KRW 31.3bn operating profit put quarterly operating margins in the 24% range.
3
The first-quarter report showed an order backlog of KRW 1.339tn, up 60.8% year on year, with two-stroke crankshaft utilization above 126%.
4
Supply-contract disclosures from January to July 2026 totaled 16 deals worth KRW 720.3bn, up 58.8% year on year, and an additional KRW 87.1bn affiliate engine order was disclosed at the end of August.
5
On the other side sit concerns about post-2026 overcapacity from simultaneous industry expansions, a narrowing technology gap with Chinese makers, and reliance on affiliate transactions.

Business structure

HD Hyundai Marine Engine's core product is low-speed main propulsion engines for ships, including diesel, LPG dual-fuel and LNG dual-fuel types, alongside key engine components such as turbochargers and crankshafts plus an aftermarket parts business.

It consolidates HD Hyundai Crankshaft, giving it a chain that runs from components to finished engines.

Formerly STX Heavy Industries, it was brought into the HD Hyundai group in 2024 and renamed; at group level this completed a vertical chain from engine parts (HD Hyundai Crankshaft) to marine engines (HD Hyundai Marine Engine) to ships (HD Hyundai Heavy Industries).

Engines dominate the revenue mix: for the second quarter of 2026 the company reported engine sales of KRW 94.1bn and parts sales of KRW 34.0bn (company disclosure, 28 July 2026).

Segment operating profit in the same quarter was KRW 22.0bn for engines and KRW 9.3bn for parts, with both lines running at double-digit margins.

Customers split between affiliate HD Hyundai Heavy Industries, other Korean yards and Chinese shipyards; the company signed a KRW 46.8bn engine order with Samsung Heavy Industries in June 2026 and a KRW 47.5bn order with XIAMEN XMXYG of China in July.

Competitively it faces Hanwha Engine and HD Hyundai Heavy Industries' engine and machinery division at home and Chinese engine builders abroad, with small and mid-sized low-speed engines plus crankshafts and turbochargers as its relative strengths.

Notably, when the acquisition was cleared the Korea Fair Trade Commission imposed three-year conditions over the high crankshaft market share, including bans on refusal to supply and on delivery delays, minimum volume guarantees and limits on price increases.

Four-stroke turbochargers tied to data-center power generation demand and group-linked aftermarket parts remain small contributors but are cited as expansion avenues.

Earnings trend

Quarterly revenue · Operating profit

₩99.2B₩17.5B25Q2₩109.2B₩20.3B25Q3₩111B₩27.9B25Q4₩133.5B₩32.6B26Q1₩128.1B₩31.3B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩179.3B₩11.3B2022₩245B₩17.9B2023₩315.8B₩33.2B2024₩402.4B₩75.9B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩99.2B	₩17.5B	17.6%
2025Q3	₩109.2B	₩20.3B	18.6%
2025Q4	₩111B	₩27.9B	25.1%
2026Q1	₩133.5B	₩32.6B	24.4%
2026Q2	₩128.1B	₩31.3B	24.4%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩179.3B	₩11.3B	₩14.1B	6.3%	7.4%	116.7%
2023	₩245B	₩17.9B	₩31.6B	7.3%	14.0%	101.4%
2024	₩315.8B	₩33.2B	₩75.8B	10.5%	24.5%	60.0%
2025	₩402.4B	₩75.9B	₩165.1B	18.9%	33.8%	66.6%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

The annual trajectory has been clearly upward. Revenue rose from KRW 179.3bn in 2022 to KRW 245.0bn in 2023, KRW 315.8bn in 2024 and KRW 402.4bn in 2025, more than doubling in three years, while operating profit went from KRW 11.3bn to KRW 17.9bn, KRW 33.2bn and KRW 75.9bn.

Operating margin moved from 6.3% to 7.3%, 10.5% and 18.9%, improving faster than the top line, which management and analysts attribute to fixed-cost dilution from higher utilization coinciding with higher engine selling prices.

Net profit attributable to owners of KRW 165.1bn in 2025 far exceeded that year's KRW 75.9bn operating profit; fourth-quarter 2025 net profit of KRW 112.1bn was about four times that quarter's KRW 27.9bn operating profit, pointing to a large one-off non-operating contribution.

Net-income-based figures for that window therefore need to be read with that one-off character in mind.

Quarterly, revenue and operating profit moved from KRW 99.2bn and KRW 17.5bn in the second quarter of 2025 to KRW 109.2bn and KRW 20.3bn, KRW 111.0bn and KRW 27.9bn, KRW 133.5bn and KRW 32.6bn, and KRW 128.1bn and KRW 31.3bn in the second quarter of 2026.

First-half 2026 revenue was KRW 261.6bn with operating profit of KRW 63.9bn, and the company said the second-quarter operating margin of 24.4% was up 6.9 percentage points year on year.

The 4.0% and 3.9% sequential declines in second-quarter revenue and operating profit were attributed to engine delivery scheduling, while parts revenue of KRW 34.0bn, up 68.3% year on year, partly offset the drop.

On the balance sheet, the debt-to-equity ratio fell from 116.7% in 2022 to 66.6% in 2025, and operating cash flow swung from negative KRW 20.4bn in 2022 to KRW 180.6bn in 2025, strengthening the cash backing behind reported profits.

Industry analysis

Demand for marine engines is driven first by International Maritime Organization environmental rules and replacement of ageing vessels, and LNG dual-fuel engines remain the mainstream choice in the ordering market.

The phased introduction of an IMO carbon-levy-type mechanism from 2027 is cited as supportive of dual-fuel engine demand.

Chinese shipyards have increased purchases of Korean-built engines, making domestic engine makers indirect beneficiaries of the green-vessel shift; trade data cited in the press put China at roughly 65% of Korea's marine engine exports.

At the same time, Chinese builders have unveiled methanol and ammonia engine prototypes, and some analysis suggests the technology gap with Korea has narrowed from three to five years to around one year.

On relative positioning, one estimate put Hanwha Engine's engine backlog at roughly KRW 5.3tn (SK Securities estimate, reported July 2026), against this company's KRW 1.339tn backlog as of the first quarter, leaving it a comparatively small player specialized in small and mid-sized low-speed engines and key components.

The cycle position is contested. Industry commentary has flagged that the shipbuilding upturn running since 2020 has already exceeded a typical expansion length, and that engine capacity projects completing around 2026 could leave idle lines and heavy fixed costs if ordering slows.

The counterargument is that as long as supply bottlenecks persist, average engine selling prices stay supported, as illustrated by HD Hyundai Heavy Industries' engine division utilization reaching 151.2% at one point.

Outlook

The company's own 2026 revenue target is KRW 597.1bn; Meritz Securities said in a January 2026 report that it expected this to be exceeded, estimating revenue of KRW 645.3bn. Hana Securities said in a May 2026 report that it estimated 2026 revenue of KRW 586.8bn and operating profit of KRW 134.9bn.

On confirmed order flow, supply-contract disclosures from 1 January to 31 July 2026 totaled 16 deals worth KRW 720.3bn, up 58.8% from KRW 453.6bn a year earlier, and on 31 August the company signed an KRW 87.1bn engine supply contract with HD Hyundai Heavy Industries, equal to 21.6% of 2025 revenue.

Hyundai Motor Securities said in a May 2026 report that it expected revenue and profit growth from the second half of 2026 as directly contracted affiliate volumes are recognized.

On utilization, the same report noted that, given original-equipment volumes that made up about 20% of 2025 output, the plant could in theory handle utilization of up to 120%.

Capacity additions look more like bottleneck relief than greenfield expansion: the quarterly report states HD Hyundai Crankshaft planned KRW 5.1bn of investment in machinery and other production equipment in 2026 to expand capacity.

Newer areas include captive turbocharger volumes linked to HD Hyundai Heavy Industries' four-stroke capacity build-out for data-center demand, and gas turbine blade deliveries under a project with Doosan Enerbility, though the earnings contribution has not been quantified.

Key items to watch in the second half of 2026 are normalization of engine revenue after delivery rescheduling, whether margins hold in the 24% range, and pricing on new orders.

Valuation

PER

8.7×

PBR

3.3×

ROE

44.3%

EPS

₩5,740

BPS

₩15,386

Dividend per share

₩0

The company's earnings base has changed completely in a few years. An operating margin in the low single digits in 2022 rose to 18.9% in 2025 and to the 24% range on a quarterly basis in the first half of 2026, while operating cash flow swung from negative to strongly positive.

When looking at earnings-based multiples, however, note that the four most recent quarters include a period in which fourth-quarter 2025 net profit exceeded operating profit by more than fourfold, leaving a wide gap between the operating and net profit trends.

Relative to book value the shares trade at a premium of several times, which can be read as reflecting fast profit growth and a larger backlog, but also implies a wider adjustment if the cycle slows.

The earnings-multiple band that brokerages reference has historically ranged very widely, from the low single digits to above twenty times (SK Securities band chart, May 2026), showing how much the multiple has swung with the industry cycle.

No cash dividend is confirmed in disclosed data, so there is no dividend-yield support for the share price. Ultimately the justification for the multiple depends on whether directly contracted affiliate volumes and new order pricing translate into actual profit from the second half of 2026 onward.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Triple improvement in pricing, mix and utilization

The operating margin rose from 6.3% in 2022 to 18.9% in 2025 and quarterly margins reached the 24% range in the first two quarters of 2026. The company said its second-quarter 2026 operating margin of 24.4% was up 6.9 percentage points year on year.

Hana Securities said in a May 2026 report that mix improvement, currency, productivity gains and cost reduction were contributing to the margin rise. Profit growing faster than revenue points to operating leverage at work.

Growing backlog and cumulative contract disclosures

The first-quarter report showed a backlog of KRW 1.339tn, up 60.8% year on year. Supply-contract disclosures from January to July 2026 came to 16 deals worth KRW 720.3bn, up 58.8% year on year, with a further KRW 87.1bn affiliate contract at the end of August.

Because revenue is recognized well after orders are booked, secured volumes translate into multi-year revenue visibility.

Group vertical integration and direct contracts

Joining HD Hyundai is seen as completing a vertical chain from engine components to finished engines and ships. Hyundai Motor Securities said in a May 2026 report that revenue from directly contracted affiliate volumes should be recognized in earnest from the second half of 2026.

The parts division also grew, with second-quarter 2026 revenue up 68.3% year on year, confirming two growth engines. Captive turbocharger demand linked to data-center power generation engines is cited as another expansion path.

Bear factors

Cycle-peak debate and simultaneous capacity additions

Industry commentary has argued that the shipbuilding upturn running since 2020 has already exceeded a typical expansion length. With major engine capacity projects completing around 2026, warnings have been raised that idle lines could emerge if ordering slows.

New facilities carry heavy fixed costs from depreciation and maintenance staffing, which could squeeze profitability in a demand downturn. Some observers also read current high margins as a product of supply shortage.

Chinese catch-up and export dependence

China's weight is large enough that trade figures put it at roughly 65% of Korea's marine engine exports. At the same time, analysis suggests the technology gap has narrowed from three to five years to around one year as Chinese makers unveil methanol and ammonia engine prototypes.

Having the largest customer base double as the potential competitor base can cut both ways for pricing power and volume durability. If Chinese engine capacity expands further, the short-delivery premium on Korean engines could compress.

Quarterly results swayed by delivery timing and one-offs

Second-quarter 2026 revenue and operating profit fell 4.0% and 3.9% from the prior quarter, which the company attributed to engine delivery rescheduling. In the fourth quarter of 2025, net profit of KRW 112.1bn was recognized against operating profit of KRW 27.9bn, pointing to a large non-operating one-off.

Brokerages also noted that a roughly KRW 1.8bn one-off reversal in the prior quarter needs to be stripped out to read the quarterly margin trend. With this level of quarterly volatility, single-quarter figures are hard to extrapolate as a trend.

Risk factors

Currency and raw materials

Engine supply contracts are struck in dollars, so won-converted amounts depend on exchange rates. The 31 August affiliate contract disclosure specified that the contract value was calculated using the first quoted rate of KRW 1,376.5 per dollar on the contract date.

Brokerages have cited a weaker won as one driver of recent margin gains, which also means margins could give back ground if the currency moves the other way. Prices for thick plate and cast steel, plus outsourced machining costs, also feed directly into costs.

Regulation and policy

An IMO carbon-levy-type mechanism is expected to be phased in from 2027, and changes in its stringency or timing could reshape the fuel mix of engine orders. LNG dual-fuel is mainstream today, but a different pace of transition to methanol or ammonia would change payback timing on equipment and technology investment.

In addition, the Korea Fair Trade Commission's three-year conditions imposed at the time of the acquisition, including bans on refusal to supply, minimum volume guarantees and limits on price increases in the crankshaft market, constrain pricing and volume policy in the parts business.

Customer concentration and affiliate transactions

A significant share of revenue is concentrated in affiliate HD Hyundai Heavy Industries, a small number of Korean yards and Chinese shipyards. A single affiliate contract disclosed on 31 August equaled 21.6% of 2025 revenue, so changes in one customer's ordering or build schedule feed straight into results.

The disclosure itself states that the contract period may change according to the counterparty yard's shipbuilding schedule. Expanding direct affiliate contracts is a growth driver but also increases group dependence.

What to watch next

Late October 2026
Third-quarter 2026 preliminary results. Key checks are whether engine revenue recovers after delivery rescheduling, whether the operating margin holds in the 24% range, and whether directly contracted affiliate volumes show up in reported revenue.
Mid-November 2026
Third-quarter report filing. It will show the backlog trend against the KRW 1.339tn reported for the first quarter, utilization rates for marine engines, two-stroke crankshafts and turbochargers, and segment revenue and margins.
Fourth quarter of 2026
Flow of new supply-contract disclosures. Watch whether the pace behind the KRW 720.3bn booked from January to July, up 58.8% year on year, continues, and how the split between Chinese shipyard orders and direct affiliate contracts shifts, alongside order pricing.
January to February 2027
Confirmation of full-year 2026 results and any dividend decision. This is the point to check whether the company's stated 2026 revenue target of KRW 597.1bn was met and whether cash dividend policy changes.
During 2027
The phased start of the IMO carbon-levy-type mechanism and the resulting shift in engine order mix by fuel, plus how the passage of the three-year Korea Fair Trade Commission remedies imposed at acquisition affects pricing and volume policy in the parts business.

Overall view

HD Hyundai Marine Engine has transformed its earnings profile, from KRW 179.3bn of revenue and a 6.3% operating margin in 2022 to KRW 402.4bn and 18.9% in 2025, and to quarterly operating margins in the 24% range in the first half of 2026.

The results were revenue of KRW 133.5bn with KRW 32.6bn operating profit in the first quarter of 2026 and KRW 128.1bn with KRW 31.3bn in the second, while the debt-to-equity ratio fell to 66.6% and operating cash flow expanded to KRW 180.6bn in 2025.

However, the fourth quarter of 2025 included net profit more than four times operating profit, so net-income-based metrics must be read with that one-off in mind, and quarterly volatility from delivery timing is real, as the small sequential decline in second-quarter revenue and profit showed.

The bullish case rests on a backlog above KRW 1tn, cumulative contract disclosures up nearly 60% year on year, and direct affiliate volumes plus parts growth from group vertical integration.

The bearish case rests on debate over where the shipbuilding upturn running since 2020 stands in the cycle, overcapacity concerns from simultaneous industry expansions, the narrowing technology gap with Chinese makers, and dependence on a small set of customers and affiliate transactions.

Shares trade at a premium to book value and no cash dividend is confirmed, so the basis for the multiple depends on whether direct contracts and new order pricing convert into actual profit from the second half onward. This report is for information purposes and contains no buy or sell recommendation or target price.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.