[Click eStock] "Hanon Systems Launches Large-Scale Rights Offering... Target Price Maintained"

On September 25, LS Securities stated regarding Hanon Systems, "The company has decided on a large-scale rights offering worth 900 billion won to improve its financial structure. However, it will take more time for a fundamental structural improvement," while maintaining its 'Buy' investment rating and a target price of 3,800 won.

On this day, Lee Byoungkeun, a researcher at LS Securities, commented, "Although net debt has been reduced, the burden of interest expenses remains significant."

On September 23, Hanon Systems decided at an extraordinary shareholders' meeting to conduct a rights offering using a shareholder allocation followed by a general public offering of forfeited shares, in order to improve its financial structure. The number of new shares to be issued is 347 million, representing a 51% increase compared to the existing 679 million shares. The planned issue price for the new shares is 2,590 won, reflecting a 15% discount from the closing price on September 23.

Of the funds raised, 800 billion won will be used for debt repayment, 51.2 billion won for operating funds, and 48.8 billion won for facility investment. The facility funds will be allocated to expanding compressor lines for eco-friendly vehicles and maintaining compressor lines for internal combustion engines.

The researcher stated, "It is highly likely that Hankook Tire will apply for excess subscription in the rights offering," and added, "As for the 22% stake currently held by Hahn & Company Private Equity Fund, since it has the option to exercise a put option at 5,200 won per share in January 2027, it is unlikely to participate in this rights offering." After the rights offering, the expected shareholder composition is Hankook Tire at 51.1%, Hahn & Company Private Equity Fund at 14.3%, employee stock ownership at 6.8%, and others at 27.8%.

Hanon Systems' net debt currently stands at 3.8 trillion won. With 800 billion won from the rights offering to be used for debt repayment and additional profit in the second half of the year also allocated to debt reduction, net debt is expected to decrease to around 2.8 trillion won. The researcher noted, "The debt ratio is expected to improve from 257% to 196%," but also pointed out, "With the interest coverage ratio at 0.85 in the first half of the year, even after this debt repayment, interest expenses are still projected to exceed operating profit."

He offered a cautious outlook on mid- to long-term profitability improvement. The researcher said, "Although the rights offering has reduced the scale of debt, more time will be needed for a fundamental structural improvement," and predicted, "The effects of profitability improvement through restructuring and operational efficiency will become evident after 2027."