"Hyundai Rotem Faces No Export Cliff, Sustained Performance Growth Expected"[Click e-Stock]

Performance Growth Expected to Continue Beyond 2027

Hyundai Rotem has achieved outstanding results in the second quarter of this year, surpassing market expectations. There are projections that performance growth, driven by K2 export volumes, will continue.

On August 6, Daol Investment & Securities raised its target price for Hyundai Rotem by 6.9% to 3.1 million won, maintaining its 'Buy' investment opinion. The closing price on the previous day was 2,010,000 won.

In the second quarter of this year, Hyundai Rotem recorded sales of 1.4176 trillion won and operating profit of 257.6 billion won. Compared to the same period last year, sales increased by 29.5%, and operating profit soared by 128.4%. The rail and defense (defense industry) divisions drove sales growth. In particular, in the defense division, the high-margin export portion reached the 70% range, boosting profits. The operating profit margin of the defense division is estimated at 30.8%, and the operating profit margin for defense exports is expected to reach 40.2%.

Positive factors are expected to continue. The second K2PL contract announced on August 4 is divided into 117 GF units produced in Korea and 63 PL units (60 produced locally and 3 pilot units produced in Korea). In addition to the 180 units, the contract also includes recovery vehicles and MRO (maintenance, repair, and operations) agreements.

According to Hyundai Rotem, while the promised number of GF units to be delivered in 2026 was 31 units as stated a year ago, the Polish military's request for faster delivery may accelerate this schedule. Preemptive work is possible, allowing the company to minimize export gaps through progress-based accounting recognition. The company made it clear that there will be no so-called 'export cliff.'

Hyundai Rotem also emphasized the need for preemptive preparations to respond to the high level of overseas K2 demand expected after 2027, further increasing the possibility of additional orders.

Choi Gwangsik, a researcher at Daol Investment & Securities, analyzed, "Even if only 31 K2 GF units are delivered next year, the company's explanation that there will be no decrease in exports in 2026 is convincing. Performance growth driven by K2 export volumes will continue, and with EC3 to EC5, strong performance or growth is expected to continue until the early 2030s."

On the 2nd, Hyundai Rotem's K2 tank was exhibited at the "Korea International Defense Industry Exhibition" held at Gyeryongdae, Chungnam. Photo by Kang Jinhyung aymsdream@