[Click eStock] "Hanwha Systems Begins Large-Scale Investment of 1.6 Trillion Won in Cash Equivalents"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 4th that it maintains a buy investment opinion and a target price of 24,000 KRW for Hanwha Systems, stating that the company will start large-scale investments based on its stable core business and 1.6 trillion KRW in cash equivalents.

Lee Dong-heon, a researcher at Daishin Securities, said, "The company possesses defense-related satellite technology and is investing in the antenna business, with plans to complete the development of an electronic flat panel antenna in 2023," adding, "In the long term, the communication service business through low Earth orbit satellites will serve as the foundation, with the antenna equipment business and Urban Air Mobility (UAM) as the main pillars, and digital platforms including blockchain will also be linked as part of the investment."

Hanwha Systems reported second-quarter sales of 485.9 billion KRW, a 50% increase compared to the same period last year, and operating profit of 31.4 billion KRW, up 72%. The sales exceeded market expectations by 24%, and operating profit surpassed them by 48%. It is analyzed that the sharp increase in sales from major development and mass production projects in the defense sector drove the performance growth.

In the defense sector, during the business cycle of 'development-mass production-maintenance,' development orders are transitioning to mass production. Currently, sales are on an upward trend through the development of L-SAM (Long-range Surface-to-Air Missile system), IFF MODE5 (Identification Friend or Foe device), and the third mass production of TICN (Tactical Information Communication Network). There is also anticipation for orders such as the military satellite communication Anasis 2 (380 billion KRW) and the fourth phase of TICN (550 billion KRW).

In Information and Communication Technology (ICT), group company sales currently account for 70%, and investments are increasing due to the growth of group companies. There are plans to expand external sales such as insurance core solutions and defense SI. The researcher stated, "Although there is no business seasonality in margins, the margin ratio tends to decline temporarily due to the one-time payment of performance bonuses in the fourth quarter."