Will the Four Defense Companies Enter the 3 Trillion Won Operating Profit Era This Year? [Yang Nak-gyu's Defence Club]

Despite Sluggish Defense Exports, Last Year's Operating Profit Surpassed 2 Trillion Won
Finalization of Defense Export Deals Expected in the First Half of This Year

Expectations are rising for the four major defense companies to achieve operating profits in the '3 trillion won range' this year. The defense industry is optimistic as export projects worth approximately $9.4 billion (about 13.4608 trillion won), delayed due to the export of K2 tanks to Poland, are expected to yield results this year.

On the 2nd, Hyundai Rotem's K2 tank was exhibited at the 'Korea International Defense Industry Exhibition' held at Gyeryongdae, Chungnam. Photo by Jinhyung Kang aymsdream@

According to financial information company FnGuide on the 22nd, the combined operating profit forecast for the four major domestic defense companies (Hanwha Aerospace, Hyundai Rotem, Korea Aerospace Industries (KAI), and LIG Nex1) for last year is expected to be 2.1146 trillion won.

Hanwha Aerospace is expected to record sales of 10.1014 trillion won (operating profit of 1.3453 trillion won), Hyundai Rotem sales of 4.2484 trillion won (operating profit of 455.1 billion won), KAI sales of 3.6625 trillion won (operating profit of 275.4 billion won), and LIG Nex1 sales of 2.9995 trillion won (operating profit of 225.5 billion won).

The operating profits of the four companies increased from 512.8 billion won in 2021 to 868.5 billion won (2022), 1.335 trillion won (2023), and recorded the first 2 trillion won level last year.

Export amounts, which had decreased, are showing signs of revival. Defense exports peaked at $17.3 billion in 2022, then declined for three consecutive years to $13.5 billion in 2023 and $10 billion in 2024. However, Hyundai Rotem is expected to sign the second contract for K-2 tanks within the first half of this year. The export amount alone is $7 billion, double the size of the first contract. The executive team is currently in final negotiations in Poland.

Hanwha Aerospace is preparing to sign a contract next month to export 20 to 30 K9 self-propelled howitzers to Vietnam. The contract size is $300 million. If the contract is finalized, it will be the first case of domestically produced weapons being exported to Vietnam. This will also be the first export of the K9 self-propelled howitzer to Southeast Asia.

Korea Aerospace Industries (KAI) is aiming to export FA-50 light attack aircraft to Peru within this year. Peru is considering purchasing 20 to 24 FA-50s for $780 million (about 1 trillion won). Additionally, the first export contract for the domestically produced supersonic fighter KF-21 is expected to be finalized. Potential target countries include the United Arab Emirates (UAE), Saudi Arabia, the Philippines, and Peru. Considering that initial contracts for fighter jets usually involve 10 or more units for formation flying, there is a forecast that contracts worth over 1 trillion won could be concluded. Furthermore, the first export contract for the domestically produced utility helicopter (KUH-1) 'Surion' could yield results as early as the first half of this year.