[Click eStock] "Hanwha Aerospace to Maintain High Growth Next Year... Target Price 500,000 Won"

Resumption of Coverage with a 'Buy' Investment Rating and a Target Price of 500,000 Won

Yuanta Securities resumed coverage on Hanwha Aerospace on the 12th, maintaining a 'Buy' investment rating and setting a target price of 500,000 KRW, expecting high growth to continue next year.

Researcher Seungwoong Lee of Yuanta Securities explained, "The target price was calculated by applying a target price-to-earnings ratio (PER) of 28.3 times to the expected earnings per share (EPS) of 17,835 KRW for next year," adding, "High growth is expected to continue next year as well."

Hanwha Aerospace's third-quarter performance this year significantly exceeded market expectations. On a consolidated basis, sales reached 2.6 trillion KRW, and operating profit was 477.2 billion KRW. These figures represent increases of 62% and 458%, respectively, compared to the same period last year. Lee said, "This was a surprise that greatly surpassed the consensus (average securities firm forecast)," noting, "Growth was driven by the ground defense and Hanwha Systems divisions. The ground defense segment recorded sales growth of 117.1% to 1.7 trillion KRW and operating profit increased by 720% to 439.9 billion KRW. Domestically, the reflection of production volume in the mass production business, which has relatively high profit margins, and exports accounting for 58.8% of sales through the delivery of 24 K9 units and 19 Chunmoo units to Poland, are understood to have driven profit growth."

The aerospace division saw sales increase by 22% to 477.9 billion KRW but recorded an operating loss of 6 billion KRW, turning to a deficit. Lee analyzed, "The operating loss is due to increased operating losses from the international joint development (RSP) related to the increased sales of GTF engines," adding, "The number of GTF engines sold in the third quarter was 254 units (189 units in Q3 2022, 231 units in Q3 2023), indicating a continued upward trend."

Strong performance is expected to continue into the fourth quarter. Lee said, "Cumulatively in the third quarter, 30 K9 units and 37 Chunmoo units were supplied to Poland. Considering this year's guidance (60 K9 units, 30 Chunmoo units), strong results are expected to continue in the fourth quarter," and forecasted, "Next year's sales are expected to increase by 14.4% year-on-year to 11.6 trillion KRW, and operating profit is projected to rise by 19.9% to 1.5 trillion KRW. This is because the delivery volume of K9 and Chunmoo units to Poland is expected to increase compared to this year."