K-Defense "Big Four" Soar with First-Quarter Operating Profit Tripling

Sales Reach 5.1 Trillion Won, Operating Profit Hits 657 Billion Won
"Further Orders Expected on the Back of Global Competitiveness"

Major K-defense companies have continued their record-breaking growth in the first quarter, backed by solid order performances. As major countries such as those in Europe and the Middle East are increasing their defense budgets due to heightened geopolitical uncertainties, leading K-defense companies are planning to actively pursue new contracts, raising expectations for further growth.

On the 18th, the Middle Eastern version of the K-2 tank was exhibited at the Korea Defense Industry Exhibition held at Kintex in Goyang, Gyeonggi Province. Photo by Kang Jinhyung

According to securities firms’ earnings forecasts over the past month as of April 21, the combined operating profit of the four major defense companies?Hanwha Aerospace, Korea Aerospace Industries (KAI), Hyundai Rotem, and LIG Nex1?for the first quarter is estimated at 657 billion won, more than tripling from 197.1 billion won in the same period last year. Their combined sales are projected to reach 5.1034 trillion won, up 24.5% year-on-year.

When including the performance of Hanwha Ocean, which has been consolidated into Hanwha Aerospace’s results from the first quarter of this year, the combined sales of the “big four” are expected to reach 8.1892 trillion won?double last year’s figure?with operating profit rising 325.9% year-on-year to 839.4 billion won. Hanwha Aerospace, the largest defense company (excluding Hanwha Ocean), is estimated to post first-quarter operating profit of 328.7 billion won, nearly eight times the 37.4 billion won recorded in the same period last year. Its sales are projected to grow 14.7% to 2.1199 trillion won.

Hyundai Rotem, which has led with the K-2 tank, is expected to see first-quarter sales surge 71.3% year-on-year to 1.2808 trillion won, with operating profit increasing 4.5 times (349.7%) to 201 billion won. After signing a basic contract with Poland two years ago to export 1,000 K-2 tanks, Hyundai Rotem completed a contract for 180 units as part of the first phase and is currently negotiating a second-phase contract for 820 units. Industry sources predict that Hyundai Rotem and Poland are in final negotiations over issues such as the additional installation of the APS (Active Protection System) on the K-2?whose importance has grown due to recent drone threats?and technology transfer related to the tanks, and expect the second-phase contract to be signed soon.

LIG Nex1, a company specializing in guided weapons, is also estimated to post first-quarter sales of 891.7 billion won, up 16.8% from the same period last year, with operating profit increasing 4.5% to 70 billion won. LIG Nex1 continues to see simultaneous growth in both sales and operating profit, backed by a stable order backlog worth 20 trillion won. With the completion of system development for the long-range surface-to-air missile system (L-SAM), a project worth 1.7 trillion won, LIG Nex1 is expected to sign a mass production contract in the second half of this year and complete domestic deployment of L-SAM by 2027. The company is also pursuing exports of multi-layered missile defense systems such as L-SAM to the Middle East and other regions, drawing attention to whether it will secure additional orders.

Korea Aerospace Industries (KAI), which produces the KF-21 Korean supersonic fighter and the FA-50 multi-role fighter, is expected to record first-quarter sales of 811 billion won and operating profit of 57.3 billion won. Sales are projected to rise 9.6% year-on-year, with operating profit increasing 19.4%. Although KAI’s first-quarter results are expected to fall slightly short of market expectations, major deliveries of finished aircraft are scheduled for the second half of the year, which is expected to significantly improve its performance. KAI is anticipating new orders worth 8.5 trillion won this year, including additional FA-50 contracts with the Philippines, exports of Surion helicopters to the Middle East, and remaining mass production contracts for the KF-21.