HD Hyundai Heavy shares halved despite strong earnings as union readies strike

Despite strong earnings, the company's share price has fallen by half from its peak.

A shadow is falling over HD Hyundai Heavy Industries just as the shipbuilder shakes off years of sluggishness and enters a full-blown boom cycle. A deepening labor dispute over performance bonuses has pushed the company's dry docks to the brink of a work stoppage.

Given shipbuilding's sequential production chain, any disruption that pushes back delivery schedules carries heavy costs from construction delays. There are also concerns it could hurt the company's competitiveness in winning new orders.

HD Hyundai Heavy's share price has fallen sharply despite strong earnings. Shares that had approached 800,000 won ($580) are now stuck in the 400,000 won range.

Analysts have set a target price of 1 million won for HD Hyundai Heavy, reflecting the strong earnings expected during the shipbuilding boom. But the stock trades far below that target, with the market increasingly worried that a strike could erode results.

The HD Hyundai Heavy Industries union has voted to strike, demanding the company share at least 30 percent of operating profit as performance pay, among other conditions. A phased strike is set to begin Wednesday. If it proceeds as planned, HD Hyundai Heavy will have faced strikes for four consecutive years since 2023. Last year, the company reached a wage agreement only after four general strikes and 11 partial strikes.

HD Hyundai Heavy Industries union members stage a protest last year. [Yonhap]

In this year's wage and collective bargaining negotiations, the union is demanding a monthly base pay increase of 149,600 won — separate from seniority raises — a 100 percent increase in bonuses, and a performance-sharing arrangement of at least 30 percent of operating profit.

The two sides have held 16 rounds of talks without finding common ground. A union official said the union would begin its fight following the passage of the strike vote.

HD Hyundai Heavy's labor and management were also locked in a prolonged wage dispute last year, resolved only after the union staged four general strikes and 11 partial strikes.

HD Hyundai Heavy has entered its first boom cycle in years. Shinyoung Securities raised its target price for the stock to 1 million won. But a series of headwinds has been putting the brakes on any share price recovery.

HD Hyundai Heavy posted sales of 6.33 trillion won and operating profit of 1.04 trillion won in the second quarter of this year, up 52.7 percent and 120.6 percent, respectively, from a year earlier. Analysts note that while a base effect from the merger with HD Hyundai Mipo contributed to the gains, rising profit margins in non-shipbuilding segments such as offshore and engine machinery are driving the overall improvement.

The full-year earnings outlook is also strong. Shinyoung Securities estimates HD Hyundai Heavy's 2026 sales at 24.24 trillion won and operating profit at 3.98 trillion won, up 37.9 percent and 95.4 percent, respectively, from the prior year. Growing earnings have raised expectations for increased dividends and other shareholder returns, but the outcome of wage negotiations with the union remains a key variable.

park@heraldcorp.com