Hanwha Ocean (042660.KS) jumped more than 12% during intraday trading ahead of Canada's announcement of the contractor for its next-generation submarine program.
As of Friday morning, Hanwha Ocean shares were trading at 120,400 won, up 13,500 won, or 12.63%, from the previous session, according to the Korea Exchange. The gain is attributed to a surge in investor sentiment reflecting expectations of winning the submarine program, worth up to 60 trillion won.
Expectations are growing in the market as the Canadian government is expected to announce the contractor for the Canadian Patrol Submarine Project (CPSP) as early as Friday. The CPSP is a project to introduce up to 12 diesel submarines to replace the aging Victoria-class submarines. The program is estimated to be worth up to 60 trillion won.
Hanwha Ocean and Germany's Thyssenkrupp Marine Systems (TKMS) are currently competing as the final candidates. If Hanwha Ocean wins the project, some analysts say it could mark the first time Canada procures a major weapons system from a non-Western country.
Recent order momentum is also supporting investor sentiment. On Tuesday, Hanwha Ocean was selected as the preferred bidder for the detailed design and lead ship construction of the Korean Next-Generation Destroyer (KDDX) project, worth a total project cost of approximately 7.8 trillion won, proving its competitiveness in the domestic naval vessel business. The market expects that if Hanwha Ocean succeeds in winning the Canada submarine project on top of the KDDX, it would expand the company's mid- to long-term order backlog and further strengthen its position in the global defense and shipbuilding markets.
"Winning the Canada submarine project could serve as further upside momentum for the stock," said Han Young-soo, an analyst at Samsung Securities. "Conversely, even if it fails to win the order, investor expectations have not been high recently and the shipbuilding industry remains solid, so the impact on the stock is likely to be temporary and limited."
