[Click eStock] "Hyundai Rotem Demonstrates Sales and Profitability with Poland K-2 Tank Export"

Daishin Securities initiated coverage on Hyundai Rotem on the 27th, stating that the company "has demonstrated high sales growth and excellent profitability through the expansion of K-2 export regions," with a buy rating and a target price of 150,000 KRW.

On the same day, researcher Lee Taehwan of Daishin Securities said, "As the contract sales contribution from the first delivery of 180 units of the Poland K-2 tank (2023?2025) increases, quarterly sales have been rapidly growing since last year. Based on the Q4 results last year, the operating profit margin of the Defense Solution segment rose to 33%," he explained.

Lee added, "The target price is based on a 12-month forward earnings per share (EPS) of 6,845 KRW and a target price-to-earnings ratio (PER) of 22.5 times. The target PER is set at a 10% discount to the average PER of the leading European defense companies," further explaining, "This also reflects the mixed nature of the business, which includes defense, rail, and production facilities."

Hyundai Rotem operates distinct business units such as Defense Solution (defense), Rail Solution (rail), and Eco Plant (production facilities). The recent increase in sales and profits has been led by the Defense Solution segment. The researcher noted, "The flagship product, the K-2 Black Panther, has proven superior performance and price competitiveness among 3.5-generation tanks," adding, "In addition to Poland, adoption is being considered in Romania and the Middle East, indicating high potential for export region expansion."

He continued, "The supply for the Poland K-2PL 2-1 phase is estimated to be around 180 units, the same as the first phase, and progress in agreements between local manufacturers and the government suggests the contract is imminent," and "The production capacity (CAPA) is understood to have sufficient margin beyond the expected export volume of 96 units in 2025."

This year, Hyundai Rotem's annual sales are projected at 5.925 trillion KRW, with operating profit at 943.4 billion KRW. The researcher emphasized, "Based on the increased delivery plan for Poland K-2 (70 units last year → 96 units this year), we expect normalization of the Rail Solution segment's performance, which recorded losses last year," and "If the K-2PL 2-1 phase contract is realized within the first half of the year, the visibility of profit growth from next year onward will significantly improve."