KOSPIShipbuilding082740

Hanwha Engine

₩48,450▼ 0.10%2026-10-02 close

Market Cap

₩4.1T

Turnover

₩18.3B

Volume

380,000 shares

Shares out.

83.5M

PER

—

PBR

6.9×

EPS

—

Dividend Yield

0.00%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q1–2025Q4) · Dividend yield is based on ₩0 per share · Prices as of the 2026-10-02 close

Report overview

Backlog and Medium-Speed Engines: Two Tests

Hanwha Engine has entered a phase where its secured low-speed marine engine backlog is converting into margin, while simultaneously being tested on execution of the new Changwon medium-speed engine business.

1
Revenue grew from KRW 764.2bn in 2022 to KRW 1,371.1bn in 2025, while the operating margin improved from -3.9% in 2022 to 9.5% in 2025 (audited consolidated figures).
2
The quarterly operating margin peaked at 14.9% in Q1 2026 before easing to 10.5% in Q2 2026, showing sensitivity to working days, currency and product mix.
3
Korea Investors Service put the separate-basis order backlog at roughly KRW 5.8tn as of end-H1 2026, equal to 4.3 times annual revenue.
4
On 19 August 2026 the company completed a dedicated four-stroke medium-speed engine plant at its Changwon headquarters, extending its lineup from propulsion to power generation.
5
Licensed production rather than proprietary design IP, and the risk of an order gap from delayed IMO regulatory timelines, remain the offsetting risk factors.

Business structure

Hanwha Engine was founded in December 1999, listed on the KOSPI in January 2011, and was renamed after a change of largest shareholder brought it into the Hanwha group in 2024.

Its core businesses are low- and medium-speed propulsion engines for large merchant and special-purpose vessels, onboard auxiliary generator engines, selective catalytic reduction (SCR) exhaust systems, parts and after-market services, and diesel power generation and leasing.

In 2024, marine engines and SCR generated KRW 1,055.2bn, or 87.8% of total revenue, while after-market, diesel generation and leasing contributed KRW 147.0bn, or 12.2%. The company is regarded as the world's second-largest maker of low-speed marine engines, with one industry tally putting its share at around 20%.

According to company filings, Hanwha Engine, HD Hyundai Heavy Industries and HD Hyundai Marine Engine all build medium and large low-speed engines under technology licences from MAN-ES or WinGD, and together supply roughly 50% of global output.

In other words, core engine design rests with the licensors, and the company competes on manufacturing, quality, delivery and cost.

Customers split between domestic yards including affiliate Hanwha Ocean and Samsung Heavy Industries, and Chinese yards, with China-bound work reported to have averaged about 27% of new orders since 2020.

In August 2026 it completed a dedicated four-stroke medium-speed engine plant of about 8,178 square metres, funded partly by reshoring subsidies as production moved back from China to Changwon, giving it a portfolio spanning propulsion and power generation; a Samsung Heavy Industries executive attended the opening as a customer representative.

Management has also said it intends to extend into hybrid propulsion and energy solutions by combining engines with energy storage systems.

Earnings trend

Quarterly revenue · Operating profit

₩387.7B₩33.8B25Q2₩297.3B₩26.6B25Q325Q4₩345.2B₩51.4B26Q1₩362.2B₩37.9B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩764.2B-₩29.5B2022₩854.4B₩8.7B2023₩1.2T₩71.5B2024₩1.4T₩130.1B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩387.7B	₩33.8B	8.7%
2025Q3	₩297.3B	₩26.6B	9.0%
2025Q4	—	—	—
2026Q1	₩345.2B	₩51.4B	14.9%
2026Q2	₩362.2B	₩37.9B	10.5%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩764.2B	-₩29.5B	-₩40.3B	−3.9%	−18.2%	331.5%
2023	₩854.4B	₩8.7B	-₩400M	1.0%	−0.2%	407.2%
2024	₩1.2T	₩71.5B	₩79.2B	6.0%	20.1%	259.3%
2025	₩1.4T	₩130.1B	₩173.8B	9.5%	31.2%	204.9%

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 multi-year trend shows a clear recovery.

Revenue rose from KRW 764.2bn in 2022 to KRW 854.4bn in 2023, KRW 1,202.2bn in 2024 and KRW 1,371.1bn in 2025, while operating profit swung from a KRW 29.5bn loss in 2022 to KRW 8.7bn, KRW 71.5bn and KRW 130.1bn, lifting the operating margin from -3.9% to 1.0%, 6.0% and 9.5%.

Net profit attributable to owners moved from a KRW 40.3bn loss in 2022 and a marginal KRW 0.4bn loss in 2023 to profits of KRW 79.2bn in 2024 and KRW 173.8bn in 2025.

Because 2025 net profit far exceeded operating profit, non-operating items and tax-related effects likely contributed materially, so it should be read separately from underlying operating strength.

The cash flow shift is even sharper: operating cash flow went from an outflow of KRW 21.1bn in 2022 to inflows of KRW 70.2bn, KRW 90.4bn and KRW 330.3bn, the last figure more than double that year's operating profit, reflecting advance payment structures and working capital swings.

Equity consequently grew from KRW 224.1bn in 2023 to KRW 556.1bn in 2025, while the debt-to-equity ratio fell from 407.2% to 259.3% and then 204.9%.

On a quarterly basis, Q2 2025 delivered revenue of KRW 387.7bn and operating profit of KRW 33.8bn (8.7% margin), Q3 2025 revenue of KRW 297.3bn and operating profit of KRW 26.6bn (9.0%), and Q1 2026 revenue of KRW 345.2bn with operating profit of KRW 51.4bn for a 14.9% margin.

In Q2 2026 revenue rose sequentially to KRW 362.2bn with operating profit of KRW 37.9bn and net profit of KRW 33.2bn, but the margin eased to 10.5%; the company stated in its filing that these are preliminary figures not yet audited.

Separately, Korea Investors Service cited H1 2026 separate-basis revenue of KRW 676.8bn with a 13.8% operating margin, highlighting the gap between separate and consolidated margin levels.

Industry analysis

Marine engine demand lags shipbuilding orders. Korea Investors Service noted that global newbuilding orders averaged about 32m CGT a year in 2017-2020 but rose to an average 58m CGT in 2021-2025, while the newbuilding price index climbed from 126 points at end-2020 to 185 points at end-July 2026.

Brokerage industry material describes engine makers winning orders roughly five to six months after a yard books a vessel, then building over two to three years, with pricing set at delivery so that rising ship prices feed through to higher average selling prices.

The 2026 ordering environment itself was strong: iM Securities calculated in its June 2026 outlook that global orders through May reached 33.56m CGT, up 62.4% year on year, and Meritz Securities in July 2026 expected further LNG carrier orders in the second half, citing 59 LNG carrier orders year to date and the scale of US LNG projects that have reached final investment decision.

On the other side sits regulatory delay.

After the October 2025 special session of the IMO's Marine Environment Protection Committee postponed adoption of net-zero framework amendments by a year, mid-term measures were expected to slip by at least a year, and industry outlook material flagged both the chance owners delay fleet replacement and a decline in 2026 ordering.

In competition, HD Hyundai Heavy Industries moved first into data centre power with its proprietary HiMSEN engine, signing a KRW 627.1bn medium-speed generator supply contract with a US energy group in April 2026.

Hanwha Engine targets the same market as an Everllence licensee, so ownership of design IP becomes a comparison point for both margin and order momentum. The oligopoly in which three Korean makers account for roughly half of global low-speed engine output remains the sector's basic structure.

Outlook

Visibility starts with the backlog. Korea Investors Service put the separate-basis backlog at about KRW 5.8tn at end-H1 2026, or 4.3 times revenue, and judged that strong operating results should continue given improved earnings power and backlog composition.

Korea Investment & Securities said in a June 2026 report that, on post-expansion capacity, the company had already secured 100% of its 2027 slots, 80% of 2028 and part of H1 2029 in backlog.

The same report projected that the dedicated four-stroke medium-speed facility offers 900MW a year, up to 180 units at 5MW per marine unit, with 167 units pre-ordered for delivery of 25 units in Q4 2026, 83 in 2027 and 59 in 2028.

Yuanta Securities noted in August 2026 that higher-margin large container ship engines had grown from 32% of orders in Q4 2024 to 60% in Q1 2026, and estimated consolidated revenue of KRW 2,347.0bn and operating profit of KRW 439.0bn for 2027.

On data centre power, SK Securities said in July 2026 that it expected a licensed production agreement with Everllence, with some volume in 2027 and meaningful North American data centre deliveries from 2028, while also noting that the engine backlog at end-Q2 2026 was entirely marine.

On the balance sheet, Korea Investors Service assessed that a net cash position has been maintained despite expanded capital spending.

The company has published a separate introduction to Norway-based SEAM through its investor relations channel, and at the plant opening outlined solution expansion beyond engine supply, including hybrid propulsion linked to energy storage.

Ultimately, results from 2027 will hinge on executing deliveries from the secured backlog and ramping the first medium-speed engine volumes.

Valuation

PER

—

PBR

6.9×

ROE

31.2%

EPS

—

BPS

₩6,628

Dividend per share

₩0

The shares trade at a substantial premium to net assets, so the book-value multiple stands out more immediately than the earnings multiple.

That reflects both an earnings path that moved from losses and break-even in 2022-2023 to recovering profit in 2024-2025, and expectations for post-expansion deliveries in 2027-2028.

Note, however, that the earnings-based metrics shown on screen are calculated from audited full-year 2025 results, so the levels can shift once the improvement seen in H1 2026 is incorporated.

No cash dividend is confirmed in recent filings, so dividend metrics are not calculated, suggesting capital is being allocated to capacity and new businesses ahead of shareholder returns.

For reference, Korea Investment & Securities said in a June 2026 report that it maintained a target price of KRW 114,000, derived by applying a 25x target price-to-earnings multiple to its 2027 net profit estimate, and Yuanta Securities estimated 2027 operating profit of KRW 439.0bn in August 2026; both figures rest on those brokerages' own assumptions.

For the basis of the current multiples to hold, investors would need to see the secured backlog delivered with the expected margins and the first medium-speed engine volumes reaching normal operation.

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

Backlog over four times revenue, with better mix

Korea Investors Service put the separate-basis backlog at about KRW 5.8tn at end-H1 2026, or 4.3 times revenue. Korea Investment & Securities said in June 2026 that 100% of 2027 slots and 80% of 2028 slots were already covered on post-expansion capacity.

Yuanta Securities calculated in August 2026 that higher-margin large container ship engines had risen from 32% of orders in Q4 2024 to 60% in Q1 2026. Improvement in both the size and composition of the backlog underpins the revenue recognition base for the next several years.

Medium-speed engine business begins

On 19 August 2026 the company completed a dedicated four-stroke medium-speed engine plant of about 8,178 square metres at its Changwon headquarters, giving it a portfolio covering both propulsion and power generation.

The project was a reshoring investment that brought production back from China, supported by subsidies from the trade ministry, Gyeongsangnam-do and Changwon, and created 87 new jobs.

Korea Investment & Securities said in June 2026 that the facility offers 900MW of annual capacity, up to 180 units, with 167 units pre-ordered and deliveries starting in Q4 2026. The structural change is a lineup that can address onshore power demand as well as onboard generation.

Stronger cash flow and balance sheet

Operating cash flow moved from an outflow of KRW 21.1bn in 2022 to inflows of KRW 70.2bn in 2023, KRW 90.4bn in 2024 and KRW 330.3bn in 2025. Over the same period equity rose from KRW 224.1bn in 2023 to KRW 556.1bn in 2025, while the debt-to-equity ratio fell from 407.2% to 204.9%.

Korea Investors Service assessed financial stability as strong, with a net cash position maintained despite larger capital spending. That implies capacity investment can be substantially funded from internally generated cash.

Bear factors

Dependence on licensed designs

Company filings show that all three Korean low-speed engine makers build under technology licences from MAN-ES or WinGD. Not owning the design IP can constrain royalty economics and the speed of responding to new engine types.

For data centre medium-speed engines, SK Securities in July 2026 based its 2027-2028 delivery scenario on the premise of a licensed production agreement with Everllence.

HD Hyundai Heavy Industries, by contrast, entered the market first with its proprietary HiMSEN engine, signing a KRW 627.1bn contract with a US energy group in April 2026.

Regulatory delay and a possible order gap

After the October 2025 IMO Marine Environment Protection Committee special session postponed adoption of net-zero framework amendments by a year, mid-term measures were expected to slip by at least a year.

Industry outlook material flagged the chance that owners wait rather than accelerate fleet replacement, alongside a decline in 2026 ordering. Because engine orders lag vessel orders by several months, any slowdown feeds into the backlog with a delay. The downtrend in the newbuilding price index during 2025 is a reminder of pricing volatility.

Quarterly margin volatility

The quarterly operating margin jumped from 8.7% in Q2 2025 and 9.0% in Q3 2025 to 14.9% in Q1 2026, then eased to 10.5% in Q2 2026. Even though Q2 2026 revenue rose sequentially to KRW 362.2bn, operating profit fell to KRW 37.9bn, showing wide swings driven by working days, currency and mix.

With 2025 net profit of KRW 173.8bn far above operating profit of KRW 130.1bn, net income alone is a poor gauge of operating strength. The company stated in its filing that the Q2 2026 figures are preliminary and not yet audited.

Risk factors

Customer concentration and currency

Revenue is concentrated on a small number of large yards, including affiliate Hanwha Ocean and Samsung Heavy Industries, plus Chinese yards, with China-bound work reported to have averaged about 27% of new orders since 2020.

Changes to a key customer's build schedule or delivery delays feed directly into the timing of revenue recognition. Engine supply contract values are set using the exchange rate on the contract date, so won movements flow into earnings.

A peer contract signed in late August 2026 likewise specified the contract-date reference rate as the basis for the amount.

Expansion execution and ramp-up risk

The Changwon medium-speed plant was completed in August 2026, but stabilising mass production and yields will take time. If the Q4 2026 delivery of 25 units cited by Korea Investment & Securities in June 2026 slips, the starting point for 2027 and later estimates could shift.

Low-speed capacity expansion likewise requires matching labour and supplier capacity. During a period of heavy capital spending, the risk of delayed payback also warrants monitoring.

Policy and regulation

Some read the delay to IMO mid-term measures as reflecting political pressure from a US administration opposed to maritime decarbonisation measures, with some forecasts pointing to a further two to three years of slippage.

On the data centre power side, regional regulation matters too, as seen in reports of New York State introducing a data centre moratorium by executive order.

For the US naval market, amendment of the Burns-Tollefson provision remains a precondition, and Meritz Securities noted in July 2026 that the FY2027 defence authorisation drafts did not include an amendment allowing Korean yards to build US combat ships. Because policy sits outside the company's control, the range of possible outcomes is wide.

What to watch next

Late October to early November 2026
Q3 2026 results. Where the operating margin lands between the 14.9% of Q1 and the 10.5% of Q2, and how the summer holiday reduction in working days shows up, will indicate whether the margin level is sustainable.
Q4 2026
Whether first deliveries from the Changwon medium-speed plant begin. Korea Investment & Securities projected 25 units in Q4 2026 in its June 2026 report, so actual deliveries and initial profitability will test the new business estimates.
Q4 2026 to H1 2027
Disclosure of a licensed production agreement with Everllence and of any North American data centre engine orders. SK Securities noted in July 2026 that the engine backlog at end-Q2 2026 was entirely marine, so a first non-marine order filing would mark the real start of diversification.
Around October 2026
Whether IMO net-zero framework discussions resume. The amendments deferred for a year at the October 2025 special session, if taken up again, could pull forward or push back the timing of dual-fuel engine replacement demand.
February to March 2027
Confirmation of full-year 2026 results, along with any dividend and investment plans. With heavy capacity spending under way, any change in shareholder return policy would signal the direction of capital allocation.

Overall view

Hanwha Engine has turned from losses to profit, with revenue rising from KRW 764.2bn in 2022 to KRW 1,371.1bn in 2025 and the operating margin improving from -3.9% to 9.5%.

Operating cash flow expanded to KRW 330.3bn in 2025 and the debt-to-equity ratio fell to 204.9%, giving it the capacity to fund expansion internally.

The roughly KRW 5.8tn separate-basis backlog at end-H1 2026 cited by Korea Investors Service forms the revenue base for the next few years, and the Changwon four-stroke medium-speed plant completed in August 2026 widens a lineup previously confined to propulsion.

On the other hand, margin swings remain wide, as shown by the drop from 14.9% in Q1 2026 to 10.5% in Q2 2026, and 2025 net profit far exceeding operating profit should be read separately from underlying operations.

Production of both low- and medium-speed engines under licence, and uncertainty over the timing of green replacement orders after the one-year deferral of the IMO net-zero framework, cut the other way.

What matters from here is whether the secured backlog is delivered with the planned margins, whether first medium-speed volumes reach normal operation, and whether a first non-marine order is disclosed. This report is for information purposes only and does not contain any buy or sell recommendation on any security.

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.