[Edaily Reporter kyoungeun kim ] On the 3rd, DS Investment & Securities maintained its “Buy” rating on HANWHA AEROSPACE(012450), noting that the company’s second-quarter earnings significantly exceeded consensus estimates, and slightly raised its target price to 1.67 million won from the previous 1.62 million won.
Kang Tae-ho, an analyst at DS Investment & Securities, explained, “This reflects upward revisions to earnings estimates for the ground defense division and consolidated subsidiaries Hanwha Ocean(042660) andHANWHA SYSTEMS(272210), as well as rising valuations within the peer group.”
HANWHA AEROSPACE’s second-quarter revenue reached 9.2 trillion won, a 47.2% increase year-over-year, while operating profit rose 58.5% to 1.4 trillion won, resulting in an operating profit margin of 14.7%. These figures exceeded the consensus estimates (revenue of 7.6 trillion won and operating profit of 1 trillion won) on both counts.
Analyst Kang cited several factors behind the strong performance, including robust revenue recognition from components such as the Polish Cheonmu system and guided missiles (accounting for over 50% of export revenue), favorable exchange rate effects, and the excellent profitability of non-Polish sales in markets such as Egypt and Australia.
He explained, “Hanwha Ocean (operating profit of 736.1 billion won, up 98% year-over-year) made a significant contribution to the consolidated earnings surprise,” adding, “The aerospace division also posted a profit of 37 billion won, maintaining its profitable trend despite losses in the Risk-Sharing Partnership (RSP) business.”
New orders include the Finnish K9 project (940 billion won) and the Estonian Cheonmu project, and he noted that discussions on specific details for the Spanish self-propelled howitzer project are underway with local partner Indra.
Analyst Kang “The key takeaway from this quarter’s results is that non-Polish sales achieved profitability on par with Polish sales, dispelling concerns about margin dilution due to local production,” he said. “Although contracts in the Middle East pipeline are being delayed due to war-related administrative procedures, further expansion of the K9 and Long-Range Surface-to-Air Missile (L-SAM) in the region is expected following the war, driven by increased demand for air defense and ground weapons.”
He continued, “Amid a continued favorable business environment, we maintain our ‘Top Pick’ rating for the company, which holds the largest portfolio of promising export products (K9, Cheonmu, and L-SAM).”