[Click eStock] "Hanwha, Positive Outlook on Hanwha Construction's Earnings Improvement"

Ebest Investment & Securities Report

[Asia Economy Reporter Minji Lee] An analyst at Ebest Investment & Securities maintained a buy rating and a target price of 41,000 KRW for Hanwha on the 19th, based on the expectation of improved performance considering Hanwha Construction's order backlog.

On a consolidated basis, first-quarter sales reached 13.1 trillion KRW, and operating profit was 465.8 billion KRW. Sales increased by 2.4% compared to the same period last year, while profits decreased by 45.1%. Sales growth was driven by in-house businesses (6.8%) and the non-financial sector (20.5%), but operating profit sharply declined due to rising costs such as raw materials and labor, as well as decreased investment income in the financial sector.

Looking at separate sales, revenue was 758.8 billion KRW, and operating profit was 28.4 billion KRW, representing growth of 6.8% and 569.1%, respectively, compared to the same period last year. The defense and machinery sectors recorded sales of 386.5 billion KRW and operating profit of 10 billion KRW, growing 28.6% and turning profitable, respectively, due to increased overseas sales in the defense sector and sales growth in the machinery sector. The global division saw sales decline by 9.1% to 372.3 billion KRW due to the restructuring of marginal businesses, but operating profit improved by 37% to 18.5 billion KRW, continuing its upward trend.

This year's investment highlight is the expectation of improved performance at Hanwha Construction. In the first quarter, Hanwha Construction recorded sales of 684.5 billion KRW, a 10.5% increase from the same period last year, supported by large-scale project commencements and existing order volumes. However, profits fell 51% to 16.6 billion KRW due to one-time costs related to rising raw material prices and labor expenses. The order backlog increased by 700 billion KRW from the previous quarter to 22.9 trillion KRW.

Seungwoong Lee, an analyst at Ebest Investment & Securities, explained, “With the commencement of major complex development projects in key station areas scheduled, annual operating profit improvement based on external growth is expected,” adding, “Maintaining the annual guidance (orders of 4.5 trillion KRW) is also positive.”