[Click eStock] "Hanwha, Diverse Business Portfolio Needs Reevaluation... Target Price Up"

[Asia Economy Reporter Myunghwan Lee] Heungkuk Securities announced on the 23rd that it maintains a buy rating on Hanwha and has raised the target price from the previous 37,000 KRW to 39,000 KRW. This is due to the increased value of investment assets of subsidiaries such as Hanwha Solutions.

Hanwha's consolidated sales for the third quarter of this year recorded 16.8 trillion KRW, a 25.5% increase compared to the same period last year. Operating profit for the same period also grew by 60.7% to 921.4 billion KRW. Heungkuk Securities evaluated this as a very favorable performance that significantly exceeded initial forecasts. Heungkuk Securities expects Hanwha's annual sales to increase by 16.6% year-on-year to 61.6 trillion KRW, and operating profit to grow by 15.5% to 3.4 trillion KRW, marking the highest operating performance ever.

The significant increase in third-quarter sales is attributed to the sales of subsidiaries Hanwha Life Insurance and Hanwha Solutions, which have a high sales proportion, increasing by 33.2% and 30.5% respectively compared to the same period last year, driving overall growth. Other subsidiaries such as Hanwha Construction and Hanwha Hotels & Resorts also showed overall strong sales. Heungkuk Securities diagnosed that the reason operating profit increased more than sales growth was due to a significant improvement in profitability of Hanwha Life Insurance and Hanwha Solutions, which contribute highly to operating profit.

However, on a separate basis, Hanwha Corporation's third-quarter sales decreased by 6.9% year-on-year to 767.8 billion KRW, and operating profit declined by 19.0% to 56.7 billion KRW, showing weak performance. Despite increased sales in the global ammonia business, sales decreased due to the completion of large defense projects and reduced facility investments. Heungkuk Securities explained that operating profit sharply declined due to cost burdens from inflation combined with a base effect in the petrochemical business.

Heungkuk Securities forecasts that Hanwha's profit fluctuations will not be significant next year, based on its diverse business portfolio. It assessed that economic recession next year due to global demand slowdown is inevitable amid increased uncertainties from high interest rates, high exchange rates, and high inflation. However, Hanwha's already established diverse business portfolio will limit profit volatility.

Specifically, Hanwha Life Insurance is expected to increase profits due to improved loss ratios. Hanwha Construction's performance is expected to improve as the backlog of already secured projects converts to sales. Hanwha Solutions is anticipated to expand profits from renewable energy, and Hanwha Aerospace is expected to maintain solid profit momentum in the defense sector.

Researcher Jongryeol Park of Heungkuk Securities stated, "Next year, the value increase of subsidiaries through solid performance momentum will lead to a stock price revaluation."