[Click eStock] "Hanwha Aerospace, Earnings Grow Again with Ground Defense"

Possibility of Increased Exports... Profitability Also Improving

Hanwha Aerospace, which posted a surprising operating profit of 892.5 billion KRW in the fourth quarter of last year, is expected to see further improvement in its performance this year thanks to its ground defense business.

On the 25th, Daol Investment & Securities maintained its 'Buy' rating on Hanwha Aerospace and raised the target price by 11.4% to 780,000 KRW. The closing price the previous day was 666,000 KRW.

According to Daol Investment & Securities, Hanwha Aerospace indicated at its Non-Deal Roadshow (NDR) that ground defense sales are expected to increase by 20% this year. The export ratio, which was 55% last year, is also expected to grow further this year. Of the current order backlog of approximately 32.4 trillion KRW, exports account for 22 trillion KRW. Local production is being prepared in Australia, where a factory was completed in August last year, and in Egypt, utilizing a state-owned factory. Although sales may decrease due to local labor costs and added value, profitability could improve as profits from core components remain unchanged, and the absolute scale of profit decline is expected to be minimal.

At the NDR, Hanwha Aerospace stated its goal to maintain the current order backlog of 30 trillion KRW in the local defense sector this year. It forecasted sales in the mid-8 trillion KRW range this year, up from 7 trillion KRW in sales and 10 trillion KRW in orders last year. New orders are expected to increase by 2 to 4 trillion KRW from domestic mid- to long-term projects. The order pipeline includes Romania IFV, additional purchases beyond the remaining third execution contract in Poland, Nordic K9, India K9 second phase, Saudi Arabia armored vehicles, and Biho 2, among others. Promotion of the L-SAM, which begins domestic mass production this year, has also started at IDEX.

Accordingly, this year's performance is expected to record sales of 25.298 trillion KRW and operating profit of 2.866 trillion KRW. The expected operating profit margin was also raised from 9.8% to 11.3%.

Choi Kwang-sik, a researcher at Daol Investment & Securities, said, "Until recently, Hanwha Aerospace was at a level where there were concerns about whether it could secure annual orders of 4 trillion KRW in local defense exports and maintain its export backlog. Now, the export backlog of 22 trillion KRW for five years is unlikely to decrease significantly, and there is a high possibility that the export backlog will increase from the massive order pipeline."

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