[Click e-Stock] "Hanwha Systems Secures Growth Engines in Defense and Shipbuilding... Target Price Up"

Target Price Raised by 58.1% Compared to Previous Estimate

Korea Investment & Securities announced on July 18 that Hanwha Systems has secured two growth engines in the defense and shipbuilding sectors, and raised its target price from 43,000 won to 68,000 won. The investment opinion remains 'Buy'.

Jang Namhyun, a researcher at Korea Investment & Securities, stated, "We have raised the target price by 58.1% compared to the previous estimate to reflect not only the value generated by the core business but also the value created by entering the U.S. merchant ship and warship markets." He further explained, "Of the appropriate corporate value of 12.8 trillion won, 55% is generated from the core business, while 45% comes from the value created by entering the U.S. shipbuilding market."

There are expectations that the pace of improvement in the defense sector's performance will accelerate. Jang commented, "This year, major defense export projects such as the Cheongung-II multifunction radar for the Middle East are progressing smoothly, which will lead to increased profits. As a result, we forecast operating profit in 2025 to reach 246.7 billion won, up 12.5% from the previous year. In addition, Hyundai Rotem recently signed a second export contract for K2 tanks with Poland worth 6.5 billion dollars, and Hanwha Systems is estimated to account for more than 7% of the K2 tank components." He added, "Reflecting the increase in exports of K2 tank parts to Poland, we have revised the 2026 operating profit forecast upward by 10.1% to 350.3 billion won."

Hanwha Systems' second quarter results this year are expected to fall short of market expectations due to factors such as tariff impacts. Jang noted, "On a consolidated basis, second quarter sales are expected to reach 890.7 billion won, up 29.6% year-on-year, while operating profit is expected to decline by 13.3% to 69.2 billion won, which is 8.2% below the consensus (the average forecast of securities firms). Although the overseas portion of defense sales accounts for 21.7%, maintaining solid profitability, it is expected that tariff impacts at the Philly Shipyard will be reflected in advance, resulting in the recognition of provisions. As a result, the size of new business consolidated losses is expected to increase to 7.8 billion won compared to the first quarter," he said.