Korean shipbuilding, defense sectors offer bright 2023 outlook

South Korea’s major companies in shipbuilding, defense and construction industries expect strong earnings this year, despite growing concerns over a global economic downturn.

In its regulatory filing on Feb. 16, Daewoo Shipbuilding & Marine Engineering Co. (DSME) has forecast its 2023 revenue on a standalone basis as 9.4 trillion won ($7.3 billion), 92.3% higher than last year’s revenue. If the forecast is realized, it will be the highest figure since 2018 when the shipbuilding giant logged a record-high 9.6 billion won.

DSME’s operating profit will swing to black with a 184.1 billion won profit this year, according to consensus estimates.

"We expect that the acquisition by Hanwha Group, set to be completed this year, will boost our revenue. DSME has secured contracts for two and a half years and will select high-profit projects,” said DSME official.

Hyundai Heavy Industries Co., the world’s top shipbuilder, expects this year’s revenue on a standalone basis to reach 12.1 trillion won, up 30.3% higher than last year’s performance. Its affiliate Hyundai Mipo Dockyard Co. is targeting 4.2 trillion won in revenue, up 13% from the last year; local rival Samsung Heavy Industries Co. aims for 8 trillion won in revenue, 34.5% higher than last year.

The rosy outlook comes as the high-profit vessels, which were ordered in 2021, will be constructed and delivered to global ship owners this year. Shipbuilders normally receive a large proportion of the deal value from their clients during the final period of carrier construction and delivery.

DEFENSE SHINES AS RUSSIA-UKRAINE WAR PROLONGS

Korean defense makers are also optimistic about their 2023 earnings as they receive global orders amid the escalating Russia-Ukraine war.

Military aircraft maker Korea Aerospace Industries Ltd. (KAI) is targeting 3.8 trillion won in revenue this year, up 37.3% from the 2021 performance. The forecast reflects delivery of 12 out of 48 units of FA-50 light combat jets orders, which the Polish armaments agency awarded last year.

Poongsan Corp., a leading copper smelter and defense equipment maker, looks to 3.2 trillion won in revenue and 251.9 billion won in operating profit this year, which are 3.2% less and 24% higher than last year’s earnings, respectively.

The expectations reflect some recent big deals. The company won a combined 574.8 billion won worth of orders between Dec. 20 of 2022 and Jan. 31 of 2023, including  a 293.4 billion won contract with Hyundai Rotem Co. to supply ammunition and large-caliber shells.

Construction firms and equipment makers also aim to reach higher goals than last year.

Major power plant builder Doosan Enerbility Co. is targeting a 6.7 trillion won revenue and 216.7 billion won operating profit this year, excluding construction equipment subsidiary Doosan Bobcat Inc.’s earnings. The figures are up 1.7% and 29.5% from the last year’s earnings, respectively.

Hyundai Doosan Infracore Co., a construction equipment unit within HD Hyundai, has also raised its target earnings from the last year’s performance – 5.2 trillion won in revenue and 384.4 billion won in profit, respectively with 15.6% and 8.5% jumps.

Samsung Engineering Co., a construction and engineering unit of Samsung Group, looks to a 10.5 trillion won in revenue and 765 billion won in operating profit, up 4.4% and 8.8% from the previous year, respectively.

Write to Ik-Hwan Kim at lovepen@hankyung.com

Jihyun Kim edited this article.