[Click e-Stock] Poongsan Benefits as K2 Tank Exports Rise

120mm

Global demand for ammunition has increased following the Russia-Ukraine war. The largest surge in demand has been for 155mm shells used in self-propelled artillery. As a result, 155mm ammunition factories are being built around the world. However, despite strong demand, there has not been much expansion in factories producing 120mm ammunition for tanks. On October 13, KB Securities maintained its "Buy" rating and a target price of 200,000 won for Poongsan, stating that the company’s performance could improve through increased exports of 120mm ammunition and other products.

On September 12, Poongsan disclosed that it had received an order worth 829.8 billion won from Hyundai Rotem. This order is believed to be the second batch of 120mm ammunition required for the export of K2 tanks to Poland. This represents a 282% increase from the first batch, which was worth 293.4 billion won. The increase in ammunition sales volume is related to the cumulative number of tanks sold. Therefore, as the cumulative number of domestic tanks sold increases, exports of 120mm ammunition will continue to rise.

KB Securities analyzed that, from Poongsan’s perspective, the profitability of 120mm ammunition may be higher than that of 155mm shells. Although the price of 155mm shells is higher, Poongsan mainly manufactures the warheads-which account for 50% of the 155mm ammunition-while the propellant (the explosive that launches the warhead) is produced by Hanwha Aerospace.

KB Securities also believes there is a high possibility that Poongsan will secure additional orders for 120mm ammunition. The potential for global exports of K2 tanks is increasing, and in particular, export prospects have grown in the Middle East, where ammunition production is low. In addition, Poongsan possesses technological advantages that are favorable for exports. For example, the main product in the 120mm ammunition category, the Armor-Piercing Fin-Stabilized Discarding Sabot (APFSDS) round, requires tungsten for its penetrator at the front. Tungsten is a rare metal that is difficult to procure, and manufacturing it into a penetrator demands advanced technological expertise. As a result, there are not many companies worldwide, aside from Poongsan, that can produce APFSDS rounds. Furthermore, with tungsten concentrate mining set to begin in Korea at the end of 2025 and tungsten oxide production starting in 2027, Poongsan’s APFSDS production capacity could increase significantly in the long term.

Choi Yonghyun, an analyst at KB Securities, stated, “There is potential for operating profit improvement through increased exports beginning in 2026,” and added, “Along with Korea’s exports of tanks and self-propelled artillery, Poongsan’s exports of 120mm and 155mm ammunition will rise. Considering the global market situation, where there is a shortage of ammunition supply, opportunities for Poongsan’s exclusive exports are also open.”