What to Buy Now is Important

Summary

Park Se-ik and Choi Ho discuss a research note that strongly recommends Korean ship engine makers Hana Engine and HD Hyundai Marine Engine after severe share price declines. They argue that record order backlogs, capacity expansions, and compressed valuations (7-8x forward P/E) offer significant upside, with added potential from data center engine demand. The conversation also contrasts engine stocks favorably with shipbuilders and touches on the broader market’s cheapness and the importance of valuation discipline.

• A research report recommends Hana Engine and HD Hyundai Marine Engine as strong buys after over 50% price drops.
• Both companies have already secured orders matching or exceeding last year's full-year totals in the first half.
• Forward P/E multiples have fallen to 7-8x despite earnings expected to grow nearly 50% annually through 2028.
• Upside targets are 115% for Hana Engine and 172% for HD Hyundai Marine Engine based on a return to 20x P/E.
• Potential new market: supplying large engines for data center power generation could further expand valuations.
• Short-term Q2 divergence likely (Hana Engine may miss due to acquisition costs; HD Hyundai Marine Engine may beat).
• Engines are judged more attractive than shipbuilders because engine growth is unconstrained by shipbuilders' top-line limits.
• Broader market seen as offering good opportunities after the correction, but individual stock selection and valuation work remain essential.