[Click eStock] "Hanwha Aerospace, Continued Strong Earnings Growth Expected... Target Price Up"

Target Price Raised by 15.8% Compared to Previous Level

NH Investment & Securities on the 18th raised the target price for Hanwha Aerospace from 190,000 KRW to 220,000 KRW, anticipating continued strong earnings growth this year driven by the full-scale export of K9 and Cheonmu to Poland. The investment rating was maintained at 'Buy.'

Lee Jae-kwang, a researcher at NH Investment & Securities, explained, "The valuation multiple applied to the ground defense sector (enterprise value divided by EBITDA) was adjusted upward from 10x to 12x, reflecting the valuation rerating of a global peer (Rheinmetall), and the target price was raised by 15.8% to reflect the stock price increase of the listed subsidiary (Hanwha Ocean)."

With the full-scale export of K9 and Cheonmu starting this year, strong earnings growth is expected to continue. The researcher stated, "Hanwha Aerospace's sales this year are projected to increase by 15.5% year-on-year to 10.8 trillion KRW, and operating profit is expected to grow by 38.1% to 973 billion KRW," adding, "This is because the delivery of Poland's K2 tanks is expected to increase from about 40 units last year to over 60 units this year, and Poland's Cheonmu multiple launch rocket systems (MLRS) are also expected to rise from 17 units last year to over 30 units this year." He further added, "Due to the increase in highly profitable exports, the operating profit margin is also expected to rise from 7.5% last year to 9%."

The order backlog for ground defense is at an all-time high. As of the end of the fourth quarter last year, the order backlog in the ground defense sector recorded 28.3 trillion KRW, a 42.4% increase compared to the previous year. The researcher said, "This corresponds to about seven years of ground defense sales based on 2023 figures," and added, "Due to orders such as Poland K9 Phase 2 (3.4 trillion KRW) and Australia's Redback armored vehicles (3.2 trillion KRW), new orders for Romania K9, Poland Cheonmu Phase 2, and UK K9 are expected this year."