"Hanon Systems Still Needs Time for Full Normalization" [Click e-Stock]

Order Delays Due to Uncertainties Such as Tariffs
Restructuring Still Underway... Costs Exceed 50 Billion Won

Hanon Systems is expected to report results for the second quarter of this year that fall short of market expectations (consensus). This is due to lower-than-expected production volumes and weakened profitability as a result of tariff impacts.

On July 18, LS Securities lowered its target price for Hanon Systems by 15.6% to 3,800 won, citing these factors. The previous day's closing price was 3,205 won.

The expected results are estimated at 2.665 trillion won in revenue and 21 billion won in operating profit. While revenue is projected to increase by 4.1% year-on-year, operating profit is expected to plummet by 71.4%, falling short of market expectations.

LS Securities believes that Hanon Systems will face difficulties throughout this year. Orders are being delayed due to policy uncertainties such as tariffs. The company diagnosed that this situation has persisted in the second quarter, following the first quarter. In the second quarter alone, the impact of aluminum and parts tariffs is estimated at 45 billion won.

Costs related to structural improvement are also expected to continue. The first round of restructuring costs, amounting to 50 billion won, which was proactively recognized last year, is currently being executed. The company expects to carry out restructuring over two years, and the cost of the second round of restructuring is expected to be similar to the first. The increase in research and development expenses is also a factor that adds to the uncertainty of results. The effects of these normalization efforts are expected to become fully apparent only in 2027.

Lee Byungkeun, a researcher at LS Securities, stated, "Due to the slow improvement in profitability and the downturn in the electric vehicle industry, the stock price and valuation are at a low point," adding, "In the second half of the year, increased e-compressor volumes from the launch of new Mercedes-Benz and BMW models are expected, and as the importance of thermal management grows in the future, the valuation is likely to rise."