[Click e-Stock] "Global Weapons Demand to Continue... Buying Opportunity for Defense Stocks"

"Hanwha Aerospace and Korea Aerospace Industries in the Spotlight"

On August 21, NH Investment & Securities commented on defense stocks, stating, "Although stock prices have declined due to progress in the Ukraine ceasefire negotiations, the global trend of increasing weapons demand is expected to continue." The firm recommended taking advantage of this as a buying opportunity and highlighted Hanwha Aerospace and Korea Aerospace Industries as stocks to watch.

On the same day, Lee Jaekwang, a researcher at NH Investment & Securities, said, "Even if a ceasefire is achieved, it is highly likely that the current front lines will be frozen, much like Korea in 1953. It would be a ceasefire that does not resolve the fundamental security threat posed by Russia's territorial expansion."

Regarding the recent decline in defense stock prices, Lee explained, "It is due to progress in the Ukraine ceasefire," and pointed out, "There are concerns that easing tensions between Russia and Europe could lead to weaker weapons demand." He also analyzed, "Rising stock prices and valuations, amid worries that the defense environment could change, have become a burden, leading investors to realize profits."

Lee assessed the possibility of a decrease in European weapons demand in the future as low. He said, "Ceasefire negotiations themselves are not easy," and added, "Even if they do occur, it is highly likely that Russia's demands will be largely met, given the circumstances."

He continued, "Even if a ceasefire is reached, it is likely to be one that does not resolve the fundamental security threat of Russia's territorial expansion. This sends a message to countries in the Middle East and Asia that territorial aggression by force is possible. As a result, the global trend of increasing weapons demand will not change."

Lee recommended using the recent decline in defense stock prices as a buying opportunity. Regarding Hanwha Aerospace, he said, "The 4.2 trillion won raised through the rights offering will be used to secure overseas production bases and expand the business portfolio, laying the foundation for sustainable mid- to long-term growth."

As for Korea Aerospace Industries, he stated, "There is a high possibility of being selected for the UJTS (U.S. Navy trainer replacement project), with the contractor expected to be chosen in the first quarter of 2027." He added, "There is also a high possibility of exporting the KF-21 to the Middle East, where political restrictions make it difficult to introduce the F-35, making it an attractive option."