[Click eStock] "Hanwha Systems, Defense Sector Leads Earnings Improvement"

Korea Investment & Securities maintained a buy rating and a target price of 22,000 KRW for Hanwha Systems, stating that the defense sector is driving earnings improvement.

Hanwha Systems reported consolidated sales of 782.1 billion KRW in the fourth quarter of last year (a decrease of 0.8% year-on-year) and an operating profit of 11 billion KRW (turning to profit compared to the previous year). Sales met the consensus (brokerage forecasts), but operating profit was 50% below consensus.

The operating profit fell short of market expectations due to accounting reasons. When the Vietnam Vanilla Studio business ended, the losses from this business were reflected as post-tax discontinued operation losses. Accordingly, adjustments occurred in the quarterly operating profits for 2023.

The defense sector recorded approximately 86 billion KRW in sales from the United Arab Emirates (UAE) M-SAM radar for the full year 2023. Sales related to Poland's K2 and K9 amounted to about 40 billion KRW.

The ICT sector continued to generate sales driven by IT demand from affiliates such as Hanwha Aerospace’s integrated ERP system and Hanwha Solutions Q CELLS’ U.S. operations. Due to performance bonus payments, an operating loss of 3.7 billion KRW was recorded.

The new business sector recorded operating losses of 2.7 billion KRW for Hanwha Intelligence and 9.1 billion KRW for H Foundation.

For this year, consolidated sales are expected to reach 2.7671 trillion KRW (+12.8% year-on-year), and operating profit is forecasted at 115.6 billion KRW (+24.5% year-on-year).

Researcher Jang Nam-hyun of Korea Investment & Securities said, "The defense sector will lead earnings improvement," adding, "Sales from the UAE M-SAM radar and Polish exports will be fully recognized, and contracts for mass production of the KF-21 radar and exports of the M-SAM radar to Saudi Arabia are expected to be signed."

Researcher Jang also stated, "Technological progress in satellite and UAM businesses will continue," noting, "They successfully launched a miniaturized SAR satellite early last year and are awaiting selection as a multi-agency miniaturized SAR mass production contractor." They also plan to participate in the bidding competition for the Australian military satellite communication project LAND 4140.

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