111% Increase This Year, Record Highs Achieved
Q2 Operating Profit 112.8 Billion Won, Up 68% Year-on-Year
Poland K2 Tank 2-1st Contract Expected to Materialize Within the Year
Hyundai Rotem, which achieved earnings exceeding market expectations in the second quarter of this year, has reached an all-time high. Profits are rapidly increasing as it begins full-scale exports of K2 tanks to Poland.
According to the financial investment industry on the 23rd, Hyundai Rotem's stock price has risen 111% since the beginning of this year. Considering that the KOSPI fell 2% during the same period, the return compared to the market reaches 113 percentage points (P). The transportation equipment sector index rose 20%. Hyundai Rotem's stock price increase stood out even within the sector.
Founded in 1999, Hyundai Rotem consists of three business divisions: Defense Solutions, Rail Solutions, and Eco Plant. The Defense Solutions division mass-produces K-series tanks and wheeled armored vehicles. The Rail Solutions division manufactures various railway vehicles such as electric trains, high-speed trains, and light rail transit, while the Eco Plant division provides infrastructure for steel and automobile production.
As of the first half of this year, the Defense Solutions segment accounts for the largest share of total sales at 48%. The Rail Solutions and Eco Plant segments account for 36% and 16%, respectively.
In the second quarter of this year, Hyundai Rotem recorded sales of 1.0945 trillion KRW and an operating profit of 112.8 billion KRW. These figures represent increases of 11% and 68% compared to the same period last year. Lee Dong-hyun, a researcher at Shinhan Investment Corp., said, "Operating profit exceeded market expectations by 36%," adding, "Sales in the Defense Solutions segment increased by 54% year-on-year due to increased deliveries to Poland." He further added, "The operating profit margin of the Defense Solutions segment rose by 6.7 percentage points to 19.4% compared to the same period last year."
The positive earnings trend is expected to continue in the second half of the year. Ahn Yoo-dong, a researcher at Kyobo Securities, said, "Assuming 38 units of K2 tanks are delivered to Poland in the second half, the third and fourth quarter earnings are expected to be even better," and "If the 2-1 phase contract for the Poland K2 tanks is signed within this year, the earnings improvement trend will continue until 2027."
The Poland 2-1 phase order includes 180 K2 tanks and 81 support vehicles. After signing the basic contract in July 2022, the second execution contract for the K2 tanks has not yet been signed. Recently, foreign media have reported that the 2-1 phase contract is imminent.
Choi Kwang-sik, a researcher at Daol Investment & Securities, analyzed, "Considering Hyundai Rotem's outlook and the consortium formation by Poland's state-owned defense group, the 2-1 phase contract appears to be imminent," and "If the 2-1 phase contract for the K2 tanks is signed, the export cliff will be extended from the original 2026 to 2028."
Expectations for growth in the Rail Solutions segment are also increasing. Following the contract signed on the 16th of last month with the Massachusetts Bay Transportation Authority (MBTA) for the supply of double-decker cars in Boston, there remains a possibility of securing orders for Morocco's high-speed rail.
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