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HD Hyundai Marine Solution ready for record IPO

April 3, 2024 - 16:04 By Moon Joon-hyun
HD Hyundai Marine Solution CEO Lee Ki-dong (third from left) speaks during a press conference held on Tuesday at the company's Global Research and Development Center in Seongnam, just south of Seoul, in anticipation of the company's initial public offering in May. (HD Hyundai)

HD Hyundai Marine Solution, an industry leader in ship life cycle maintenance formerly known as Hyundai Global Service, has detailed a growth framework for its stock market debut as it gears up for what is expected to be Korea's largest initial public offering in the first half of 2024.

The company held a press conference on Tuesday at the company's Global Research and Development Center in Seongnam, just south of Seoul, as it prepares to join the Korea Composite Stock Price Index in May.

Lee Ki-dong, CEO of HD Hyundai Marine Solution, said, “By going public, we will invest heavily in logistics infrastructure, eco-friendly retrofitting and software-defined vehicle research and development.”

With an anticipated market capitalization ranging between 3.258 trillion won ($2.4 billion) and 3.771 trillion won ($2.7 billion), the company is getting its hopes high. “Discussing specific targets is tricky before the IPO. I just wouldn't be surprised if we managed to double our revenue in the next half-decade," the CEO said.

The company's chief financial officer, Kim Jung-hyuk, said, "Our high valuation likely stems from our asset-light business model, which benefits from a stable, established supply chain with the shipbuilder HD Hyundai Heavy Industries. Investors seem to really appreciate this, especially in today's high-interest-rate climate."

HD Hyundai Marine Solution has shown consistent growth by focusing on its aftermarket (AM) solutions business as its financial backbone. This segment specializes in comprehensive technical support and parts supply for HD Hyundai-built ships and engines. With gross margins as high as 30 percent, the AM division hit sales of 606.9 billion won last year, marking a 150 percent increase since its inception.

"We're channeling over 40 percent of our AM investment dollars into beefing up our logistics infrastructure to double down on it," said CEO Lee.

HD Hyundai Marine Solution has diversified its portfolio to three other business models: eco-friendly retrofitting, software-defined vessels with digital solutions, and bunkering services, which involve the supply of fuel oil to ships. This expansion positions HD Hyundai as the world's sole provider of comprehensive services spanning the entire life cycle of a ship.

“We are insulated from the industry's ups and downs because we are right in the middle of shipbuilding and shipping. Shipping lines are always going to need us, no matter how rough things get in shipbuilding. Ships still need to sail, which means they need our services, period," the CEO added.

The company's strategy also centers on growth through the International Maritime Organization's increasingly stringent environmental regulations. This includes retrofitting existing ships to be more eco-friendly, adding less polluting exhaust systems and mechanisms treating ballast water to protect marine life.

A notable future-focused project involves converting old liquefied natural gas carriers into Floating Storage and Regasification Units, or FSRUs, a timely solution given the current LNG supply challenges post-Russia-Ukraine conflict. FSRUs offer a faster and cost-effective alternative to traditional onshore LNG terminals.

"FSRUs represent a complex, high-barrier technology. We're in ongoing talks with European and Asian carriers to retrofit LNG carriers into FSRUs. We plan to acquire a company highly specialized for this tech as our subsidiary,” said CEO Lee.

HD HMS embarked on its software-defined vessel, or SDV, vision with the world's first digital control center for the shipbuilding industry in Busan in 2019. This center, now located at the company's Global R&D Center, boasts a 300-inch main screen linked to 12 large 55-inch monitors, providing real-time operation data for over 430 smart-equipped ships.

Choi Bong-joon, head of the Digital Technology Center at HD Hyundai, said, “We're set to invest significantly in software-defined vessel business, which essentially represents our leap into digital, utilizing the specialized technologies we’ve developed across HD Hyundai.”

“AI solutions like OceanWise use digital twin technology for performance and emissions monitoring. It hasn't generated revenue yet, but we're working on building partnerships across the industry, setting the stage for advancements like autonomous shipping,” Choi added.