[Click eStock] "Hanwha Systems, Earnings Surprise Due to Defense Industry Boom"

Completion of 1.1606 Trillion KRW Paid-in Capital Increase... Aggressive Investment Expected
Daishin Securities "Hanwha Systems Maintains Target Price of 24,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Hanwha Systems posted second-quarter earnings this year that exceeded market consensus, driven by its defense sector. From the second half of the year, it is expected to make large-scale investments in new businesses using cash raised through a rights offering.

According to Daishin Securities on the 2nd, Hanwha Systems' second-quarter sales increased by 50% year-on-year to 485.9 billion KRW, and operating profit rose by 72% over the same period to 31.4 billion KRW. This represents an earnings surprise, surpassing the second-quarter sales and operating profit consensus of 392 billion KRW and 21 billion KRW by 24% and 48%, respectively.

The strong performance in the defense sector led to the earnings surprise. The defense sector's second-quarter sales nearly doubled, increasing 99% year-on-year to 367.4 billion KRW, and operating profit surged 255% to 22 billion KRW during the same period. This performance offset a 14% decline in sales in the ICT (Information and Communication Technology) sector and a 4.2 billion KRW investment loss from its antenna subsidiary Hanwha Pager. Lee Dong-heon, a researcher at Daishin Securities, explained, "The increase in defense sector sales was due to the strong performance of major development and mass production projects."

Daishin Securities also emphasized the importance of future investments. Having completed a rights offering worth 1.1606 trillion KRW, Hanwha Systems held approximately 1.6 trillion KRW in cash as of the end of the second quarter, which is expected to be used for aggressive investments. The researcher stated, "They will continue additional investments in previously invested companies such as Pager Solutions, Kaimeta, a portable antenna technology company, and Overair, a personal aircraft company," adding, "The rights offering marks the starting point for the realization of new businesses such as Urban Air Mobility (UAM), next-generation antennas, and satellites."

Accordingly, Daishin Securities maintained a 'Buy' investment opinion on Hanwha Systems with a target price of 24,000 KRW. The closing price on the previous day was 16,950 KRW.