[Click eStock] "Hyundai Rotem K2 Tank Expands Globally"

Expectations Rise for Exports to Neighboring Countries Following Local Production in Poland

Hyundai Rotem is expected to post an operating profit for the second quarter of this year that falls somewhat short of expectations due to foreign exchange effects. Nevertheless, as the number of countries importing the K2 tank increases, analysts predict the company will continue to improve its performance.

On the 9th, LS Securities maintained its target price for Hyundai Rotem at 2.3 million won and its "Buy" investment rating, citing these factors. The previous day's closing price was 1,844,000 won.

The consolidated results for the second quarter of this year are projected to be 1.6231 trillion won in sales and 216.5 billion won in operating profit. These figures represent increases of 48.3% and 92.0%, respectively, compared to the same period last year. LS Securities expects sales to exceed market consensus, while operating profit will fall short. This is because demand for the K2 tank has increased, leading to higher capital expenditures and labor costs, while the foreign exchange effect has diminished compared to the first quarter.

Specifically, for the Rail Solutions division, second-quarter sales are expected to reach 659.1 billion won, with operating profit at 4 billion won. The margin improved due to provisions set in the fourth quarter of last year, and the export share of sales already exceeded 50% in the first quarter. As the business grows in scale, this is expected to directly contribute to improved performance.

For the Defense Solutions division, second-quarter sales are projected at 784.8 billion won, with operating profit at 204.3 billion won. These figures represent increases of 32.1% and 87.0%, respectively, compared to the same period last year. By the fourth quarter of this year, the remaining units from the first contract for Poland's K2 tanks will be delivered, and 120 units under the second direct export contract are expected to be delivered either next year or in the first half of 2027. Local production of the K2PL is anticipated to begin in the second half of 2027.

Additional orders are also anticipated following Poland's second contract. Unlike the first contract, with the start of local production in Poland, some components will be manufactured there, and if K2 tanks are exported to neighboring countries, Poland will also benefit. Expectations remain high for the fourth domestic mass production of the K2 tank, as well as exports to Eastern Europe and the Middle East beyond Poland.

Choi Junghwan, an analyst at LS Securities, explained, "The higher expectations will be justified by diversification of export markets," and added, "Since the core components for the K2PL will still be produced domestically, the margin deterioration from local production will be limited."

At the Korea International Defense Industry Exhibition held on the 2nd at Gyeryongdae, Chungnam, Hyundai Rotem's K2 tank is on display. Photo by Kang Jinhyung aymsdream@