[Click eStock] "Hanon Systems, Q3 Earnings Below Expectations... Investment Appeal Drops"

[Asia Economy Reporter Park Ji-hwan] Hanwha Investment & Securities evaluated that Hanon Systems' Q3 performance this year fell short of expectations, reducing its investment appeal. The investment opinion was maintained at Hold, and the target price was kept at 18,000 KRW.

Junho Park, a researcher at Hanwha Investment & Securities, stated, "Hanon Systems' Q3 consolidated results showed sales of 1.7042 trillion KRW and operating profit of 70.6 billion KRW, down -10.4% and -41.0% year-on-year, respectively. However, net income attributable to controlling interests increased by 3.5% to 50.9 billion KRW. Operating profit and net income missed consensus estimates by -14.1% and -16.5%, respectively.

Researcher Park said, "Following the previous quarter, the triple challenges of semiconductor shortages causing disruptions in finished car production, increased transportation costs, and rising raw material prices persisted," adding, "Despite a recovery in volume from the top 2 customer Ford in Q3, fixed cost burdens expanded due to intensified production disruptions at most North American and European customers such as GM and Volkswagen, as well as HMG."

The cumulative order amount for Q3 reached approximately 867 million USD, achieving 79% of the annual target and showing a favorable performance. The annual order target was raised again to 1.1 to 1.2 billion USD.

It is analyzed that due to extraordinary factors such as COVID-19, semiconductor shortages, and global logistics difficulties, the pace of growth in scale and profits continues to fall short of market expectations. Compared to global peers in the same industry, valuation pressure remains significant, leading to a decrease in short-term investment appeal.

Researcher Park stated, "However, the long-term growth story remains intact, and with the stock price more than 20% lower than its peak, if the price weakness continues, a change in perspective will be necessary starting from the earnings season in Q2 next year when the base effect fully materializes."