[Click eStock] "Hyundai Rotem, Q1 Earnings Surprise... Target Price Up 25%"

[Asia Economy Reporter Minji Lee] On the 27th, Daishin Securities raised its investment opinion on Hyundai Rotem to "Buy," citing first-quarter results that exceeded market expectations, and set a target price of 20,000 KRW, up 25% from the previous target.

Hyundai Rotem's consolidated sales for the first quarter reached 670.5 billion KRW, a 13% increase compared to the same period last year. Operating profit soared 918% to 11.7 billion KRW during the same period. By segment, the railway division recorded 352.2 billion KRW, up 8% year-on-year. This was due to the normalization of projects delayed in the fourth quarter of last year, which led to the recognition of revenue from an increased order backlog. The railway division's order backlog stood at 7.82 trillion KRW, 19% higher than a year ago.

Additionally, the defense division's sales surged 55% to 173.5 billion KRW during the same period, which is believed to be largely due to increased sales following the introduction of foreign transmissions for the K-2 tank. The plant division recorded 98.1 billion KRW, a 9% decrease compared to the previous year.

Considering that restructuring costs of 13 billion KRW were reflected in operating profit, the actual operating profit is estimated to have been 24.7 billion KRW. Researcher Dongheon Lee from Daishin Securities explained, "The railway division likely improved to a profit of 5 billion KRW," adding, "The defense division increased by 585% to 8.6 billion KRW, and the plant division recorded an operating loss of 4 billion KRW, narrowing the loss compared to 7.9 billion KRW in the first quarter of last year."

Hyundai Rotem appears to have been minimally affected by the COVID-19 pandemic. Revenue is recognized based on progress, and production at the Changwon plant is focused on cost input, leading to the assessment that the negative impact of COVID-19 is not significant.

Furthermore, the company expects to record approximately 3 trillion KRW in orders for the year. In the first quarter, new orders included 347 billion KRW for Singapore electric trains and 313 billion KRW for GTX-A line electric trains, totaling 791 billion KRW. Researcher Dongheon Lee stated, "There are still low-priced orders remaining, so further confirmation of profitability improvement in the railway division is needed in the first and second quarters," and added, "The issuance of 240 billion KRW in convertible bonds has resolved liquidity issues."

This content was produced with the assistance of AI translation services.