[Edaily Reporter PARK MIN ] DB Securities announced on the 5th that it is maintaining a target price of 90,000 won and a “Buy (BUY)” investment rating for HANWHA SYSTEMS(272210), citing expectations for stable growth in the defense sector and momentum in new business segments.

In a report published that day, Seo Jae-ho, an analyst at DB Securities, stated, “HANWHA SYSTEMS’ second-quarter revenue rose 45.5% year-over-year to 1.1 trillion won, and operating profit surged 219.2% to 103.7 billion won, both exceeding consensus estimates,” adding, “The key to this earnings surprise lies in revenue growth and improved profitability in the defense sector.”

Regarding defense revenue, the analysis attributed the increase to the expansion of domestic mass production projects (such as the KF-21 and Ulsan-class Batch-III) and the full-scale launch of production for export projects (such as the K2 in Poland and the MFR in the UAE and Saudi Arabia). In terms of profitability, it was estimated that this was driven by foreign exchange gains from export projects, rising margin rates due to the full-scale launch of mass production, and the expansion of domestic mass production, with settlement gains partially reflected.

Although the export share of second-quarter defense sales was approximately 23%—a 30% decrease from the first quarter—the defense sector’s operating profit margin (OPM) reached a record high of 14.8%. Although a “strong first half, weak second half” trend is expected due to development costs in the second half, the forecast indicates a clear year-over-year increase as the progress rate of high-margin projects rises. Significant growth in revenue and operating profit is anticipated starting in the second half of this year, when export projects gain full momentum.

Analyst Seo Jae-ho stated, “Expectations are rising for orders from leading Chonbang defense contractors in the second half of the year for ground defense (K9, K2, Redback, etc.), air defense (M-SAM, L-SAM), and naval systems (unmanned vessels, combat ships), and the company is expected to benefit from this trend.” “Additionally, starting with the announcement of the selected contractor for the multi-agency ultra-small SAR satellite (40 units) project in the third quarter, satellite projects led by the Ministry of National Defense and the Korea Space Agency are also expected to take shape,” he said.

He continued, “With the company’s entry into the defense industry becoming increasingly tangible—as evidenced by the recent award of a contract for a Maritime Missile Test and Measurement Vessel (MRIV) through HPS—the company currently possesses diverse momentum spanning the space, shipbuilding, and defense sectors.”