[Click eStock] "Hanon Systems, Value Improvement Expected with Change in Management Rights"

Hankook Tire Fully Acquires Management Rights 10 Years After Initial Investment
Q1 Operating Profit Declines... Expected to Improve from Second Half
Interest Expenses Expected to Decrease from Next Year Due to Capital Increase Effect

Daishin Securities raised the target price of Hanon Systems from 7,200 KRW to 7,800 KRW on the 7th, expecting an improvement in corporate value due to the change in management control. The investment rating of market perform was maintained. Hanon Systems' closing price on the previous trading day was 6,490 KRW.

Kim Gui-yeon, a researcher at Daishin Securities, said, "Volatility in stock prices due to the acquisition event is expected to increase," and added, "Considering the current market capitalization discount compared to the acquisition value and the capital raising through a rights offering, the short-term stock price trend is expected to be positive."

On the 3rd, Hankook Tire and Hanon Systems each held board meetings and approved a plan for Hankook Tire to acquire half (25%) of the 50.5% stake held by the private equity fund (PEF) operator Han & Company, the largest shareholder of the system, for 1.3679 trillion KRW. Hankook Tire decided to fully acquire management rights after 10 years since its first investment in 2014. Additionally, Hankook Tire plans to participate in Hanon Systems' rights offering soon, investing 365.1 billion KRW. Including the new shares, Hankook Tire will become the largest shareholder with a 50.5% stake. Han & Company will remain the second-largest shareholder with a 23% stake.

Hanon Systems' operating profit for the first quarter is expected to be 51.6 billion KRW, which is below the consensus (market average forecast) of 68.4 billion KRW. Researcher Kim said, "However, from the second half of the year, the effects of profitability improvement strategies will materialize, and profitability visibility is expected to expand due to improved demand for battery electric vehicles (BEV)." He added, "The average operating profit for the third and fourth quarters is expected to improve to around 108.1 billion KRW."

The funds secured through the rights offering are planned to be used for debt repayment of 200 billion KRW and operating funds of 165.1 billion KRW. Researcher Kim said, "Although dilution of shares through the rights offering is inevitable, improvements in financials and operating cash flow are positive," and added, "Interest expenses are expected to decrease by 15.4 billion KRW in 2025 due to debt repayment." Free cash flow (FC) is also expected to improve in 2024-2025.

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