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Could The Market Be Wrong About HD Hyundai Heavy Industries Co.,Ltd. (KRX:329180) Given Its Attractive Financial Prospects?

Simply Wall St · 2d ago

With its stock down 14% over the past month, it is easy to disregard HD Hyundai Heavy IndustriesLtd (KRX:329180). However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. In this article, we decided to focus on HD Hyundai Heavy IndustriesLtd's ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for HD Hyundai Heavy IndustriesLtd is:

20% = ₩1.3t ÷ ₩6.5t (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.20 in profit.

View our latest analysis for HD Hyundai Heavy IndustriesLtd

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

HD Hyundai Heavy IndustriesLtd's Earnings Growth And 20% ROE

To begin with, HD Hyundai Heavy IndustriesLtd seems to have a respectable ROE. On comparing with the average industry ROE of 8.0% the company's ROE looks pretty remarkable. This probably laid the ground for HD Hyundai Heavy IndustriesLtd's significant 73% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared HD Hyundai Heavy IndustriesLtd's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 18%.

past-earnings-growth
KOSE:A329180 Past Earnings Growth December 18th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Is HD Hyundai Heavy IndustriesLtd fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is HD Hyundai Heavy IndustriesLtd Efficiently Re-investing Its Profits?

HD Hyundai Heavy IndustriesLtd's three-year median payout ratio to shareholders is 23%, which is quite low. This implies that the company is retaining 77% of its profits. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Along with seeing a growth in earnings, HD Hyundai Heavy IndustriesLtd only recently started paying dividends. Its quite possible that the company was looking to impress its shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 31% over the next three years. However, HD Hyundai Heavy IndustriesLtd's future ROE is expected to rise to 26% despite the expected increase in the company's payout ratio. We infer that there could be other factors that could be driving the anticipated growth in the company's ROE.

Summary

Overall, we are quite pleased with HD Hyundai Heavy IndustriesLtd's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.