Hanwha Ocean has further strengthened its defense competitiveness by securing the contract for the lead ship of the Korean Destroyer Next Generation (KDDX). At the same time, with the addition of strong performance in commercial ships and offshore plants, the trend of earnings improvement is gaining momentum. While market attention has focused on the KDDX order itself, it is also noteworthy that this contract could serve as a turning point to expand the existing shipbuilding-centric business structure to include special vessels.

KDDX Lead Ship Contract... Starting Point for Follow-on Projects

Hanwha Ocean signed a contract with the Defense Acquisition Program Administration (DAPA) for the detailed design and construction of the KDDX lead ship. According to KBS, the project covers six 7,000-ton-class destroyers based on domestic technology, with a total project cost of approximately 7.8 trillion won. The lead ship is scheduled to be delivered to the Navy in 2032.

Daishin Securities analyzed that this contract is not simply a vessel construction project, but one that simultaneously carries out detailed design and lead ship construction. The KDDX is expected to be equipped with nine types of domestically developed equipment, including a manned-unmanned complex combat system, a multi-layer defense system, a cyber protection system, and ship automation technology.

Evaluations suggest that the core significance of this contract lies not in the scale of revenue but in the expansion potential of follow-on projects. According to Daishin Securities, the ordering method and schedule for the five follow-on destroyers have not yet been finalized. However, the industry is raising the possibility of orders being placed around 2028, and whether they will be ordered in a single batch is a matter to be decided later. In other words, this contract is not a concluded project, but the starting point for follow-on projects.

Earnings Also Show Resilience... Commercial Ships and Special Vessels Contribute Simultaneously

Earnings also reflect the shipbuilding industry's recovery trend. According to an EBN report, Hanwha Ocean recorded consolidated revenue of 5.4432 trillion won and operating profit of 736.1 billion won in the second quarter of 2026. Compared to the same period last year, revenue increased by 65.2% and operating profit by 98.0%. On a cumulative basis for the first half of the year, revenue stood at 8.6531 trillion won and operating profit at 1.1772 trillion won, increasing by 34.4% and 86.8% respectively, continuing the trend of profitability improvement.

A key feature of these earnings is the structure in which both commercial ships and special vessels contribute simultaneously. According to Hanwha Group's company introduction, Hanwha Ocean encompasses commercial ship businesses such as LNG carriers (LNGC), VLCCs, VLGCs, and container ships, as well as offshore plants including FLNG, FPSO, and FPU, and special vessel businesses including submarines, destroyers, auxiliary ships, and MRO.

Expectations for Cycle Risk Diversification Effect

The shipbuilding cycle and the defense cycle have different cycles. Commercial ships are heavily influenced by global trade, vessel prices, and shipping industry conditions, whereas special vessels are more influenced by national budgets and mid- to long-term defense projects. Therefore, if the proportion of both expands together, the effect of lowering dependence on a specific industry cycle can be expected.

The connectivity between defense and shipbuilding technologies is also drawing attention. The ship automation technology and domestic combat systems applied to the KDDX are areas that go beyond simple warship construction and can be utilized to accumulate large-scale ship design and automation technologies. Hanwha Ocean's recent steady strengthening of its special vessel competitiveness is also interpreted as a strategy to secure long-term technological competitiveness rather than short-term orders.

Expansion of Mid- to Long-Term Order Base is Key Variable

The market is paying more attention to whether the mid- to long-term order base will expand rather than the direct impact of this KDDX contract on earnings. The schedule and method for ordering follow-on ships have not yet been decided, and there is a possibility of changes depending on government budgets and project promotion schedules. In making investment decisions, it is necessary to confirm future additional orders and project progress rather than the lead ship contract itself.

As commercial ship order recovery and defense business expansion proceed simultaneously, Hanwha Ocean is transforming into a balanced structure between the shipbuilding industry and special vessel businesses. In the short term, earnings improvement is continuing, but in the mid- to long term, the KDDX follow-on projects and additional orders in the offshore plant and special vessel sectors are cited as key variables that will sustain the growth trend.

[※ This article was written by synthesizing public disclosures, corporate materials, and reports from KBS, EBN, and Daishin Securities, and is not intended to recommend the purchase or sale of any specific stock. Investment decisions and responsibilities lie with the investor. This is an article partially written with AI assistance.]