[Click eStock] "Europe Defense Budget Increase, Opportunity for Hyundai Rotem"

Target Price Raised from 92,000 KRW to 118,000 KRW

Korea Investment & Securities has raised the target price for Hyundai Rotem from 92,000 KRW to 118,000 KRW, anticipating benefits from increased defense spending by European countries to strengthen their own national defense. The investment rating remains 'Buy.'

With the recent strengthening of the U.S.'s America First policy, there is a growing trend of self-reliance in Europe, which is under pressure to increase defense budgets. Jang Nam-hyun, a researcher at Korea Investment & Securities, stated, "There are two benefits for domestic companies from this. First, competition intensity decreases in non-European regions. Second, the market expands due to increased demand within Europe." He emphasized, "Hyundai Rotem fits both aspects."

Having completed the localization of the K2 tank transmission, Hyundai Rotem is expected to begin full-scale marketing in the Middle East starting this year. Researcher Jang explained, "The Middle East tank export market size, considering replacement demand from Saudi Arabia and the United Arab Emirates (UAE), is estimated to be over 18 trillion KRW," adding, "This presents an opportunity to enter the market under conditions of reduced competition intensity."

The expanding demand for European weapon systems also presents an opportunity for Hyundai Rotem, which has established a local production base in Poland. Researcher Jang analyzed, "Hyundai Rotem is preparing for a second contract for K2 tanks with Poland," estimating the contract volume at 180 units, some of which will be locally produced in cooperation with Poland's state-owned defense company PGZ. He added, "Countries like Slovakia are showing interest in the K2 tanks to be produced in Poland," and "Exports are expected to expand using the Polish production base in the future."