Hyundai Rotem Upgrades Credit Rating Again After 8 Months... 'A+' to 'AA-'

Reflecting Defense Industry Boom and Expanding Overseas Exports
Simultaneous Improvement in Financial Stability and Profitability

Hyundai Rotem has had its credit rating upgraded across the board from 'A+' to 'AA-' by Korea’s three major credit rating agencies: Korea Ratings·KR, Korea Investors Service, and NICE Investors Service.

Hyundai Rotem CI.

On April 20, Hyundai Rotem announced that this upgrade reflects both improvements in its profit structure due to expanding overseas defense exports and positive industry outlooks for the company.

This credit rating upgrade comes approximately eight months after the previous revision in July last year. The 'AA' rating is the second highest among a total of ten levels, and is granted to companies with outstanding debt repayment capacity and a stable profit and financial structure. If the Defense Solutions division continues to expand exports, some believe that Hyundai Rotem could potentially reach the top 'AAA (Triple A)' rating.

Korea Investors Service evaluated that Hyundai Rotem has secured a solid mid- to long-term profit base, thanks to a robust order backlog. As of the end of last year, Hyundai Rotem's total order backlog stood at approximately 30 trillion won, with both the Rail Solutions and Defense Solutions divisions recording their highest levels ever. In particular, the Defense Solutions division holds an order backlog of 10.5181 trillion won, bolstered by export achievements in countries such as Poland and Peru.

Performance has also improved significantly. Last year, Hyundai Rotem achieved an operating profit of 1 trillion won for the first time in its history, setting a new record. The expansion of production in both the Defense Solutions and Rail Solutions divisions was cited as a driving force behind this improvement.

Korea Investors Service stated, “By securing a high-quality order backlog in the Defense Solutions division, Hyundai Rotem has established a solid long-term profit base,” adding, “A diversified business structure encompassing railways, defense, and eco-plant operations is helping to offset the volatility of individual businesses.”

The rise in defense demand resulting from changes in the global security environment has also been a positive factor. Korea Ratings·KR noted, “With key countries strengthening their independent defense postures, demand for enhanced defense capabilities is growing. Hyundai Rotem is negotiating exports with various nations, centered around the K2 tank, and is expected to generate stable revenue going forward.”

Assessments of financial stability are also favorable. Hyundai Rotem plans to invest more than 1.8 trillion won in facilities for the Defense Solutions division, the development of unmanned and manned complex weapons systems, and new investments in the aerospace business. Although this could increase working capital volatility, the company is expected to maintain financial stability, underpinned by a stable business base and robust cash generation.

NICE Investors Service commented, “The actual debt ratio, taking into account advance payments, remains low, and overall financial stability indicators are excellent. Hyundai Rotem is expected to maintain short- to mid-term financial stability by using strong cash flow from solid operating results to meet working capital and investment needs.”

Hyundai Rotem's credit rating has been on a steady upward trend in recent years. After being raised from 'A0' in 2023 to 'A+' in July last year, the company has now achieved 'AA-', which is expected to enhance its external credibility and reduce funding costs.

Hyundai Rotem plans to further strengthen its risk management system to cope with financial market uncertainties such as those in the Middle East, while continuing efforts to boost business competitiveness and financial soundness. The company also aims to expand high-quality orders by closely monitoring risks from the bidding stage through its transparent order review committee, which includes both internal and external directors.

A Hyundai Rotem official stated, “Through transparent management, we will secure stability and continuity in our operations and further strengthen market trust. We will proactively respond to changes in the global security environment and continue to improve profitability, maintaining a stable management foundation.”

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