[Click eStock] "Hanwha's Defense Sector Drives Earnings... Target Price Raised"

On July 23, Yuanta Securities raised its target price for Hanwha from 63,000 won to 122,000 won, citing robust fundamentals and an increase in the value of its subsidiaries as reasons for an expected upward trend in the stock price. The investment rating was maintained at 'Buy'.

Hanwha's consolidated sales for the second quarter are estimated at 17.9 trillion won (up 38.1% year-on-year), with operating profit estimated at 1 trillion won (up 97.9%). Hanwha Aerospace is expected to drive consolidated results, benefiting from the inclusion of Hanwha Ocean in its consolidated statements and strong growth from deliveries of K-9 and Cheonmu to Poland. Hanwha Solutions is also expected to contribute by returning to operating profit.

Lee Seungwoong, a researcher at Yuanta Securities, stated, "The high growth of Hanwha Aerospace has already materialized. Expansion of export volumes for ground defense, including to Poland, has been confirmed, and the consolidation of Hanwha Ocean and the Philippine shipyard is also contributing to growth." He added, "In the construction segment, 300 million dollars related to Iraq BNCP receivables and Inspire settlement payments are being reflected, while in the global segment, the operation of the Yeosu nitric acid plant is expected to contribute around 70 billion won in sales this year." An increase in brand royalty income is also anticipated due to rising subsidiary sales.

Thanks to this subsidiary earnings growth and a turnaround in the construction segment's profits, Hanwha's consolidated sales for this year are projected at 75.4 trillion won (up 35.6% year-on-year), with operating profit at 4.7 trillion won (up 95.2%). Lee noted, "Given the recent expectations for the resolution of the domestic stock market discount, the increase in the value of subsidiary stakes, and the growth in subsidiary earnings, further stock price re-rating is possible."