[Click eStock] "Hanwha Systems, Beneficiary of Expanding K2 Tank Exports"

On October 17, Korea Investment & Securities stated that Hanwha Systems is expected to continue recognizing costs related to the initial normalization of its consolidated subsidiary, Philia Shipyard, through the fourth quarter of this year. However, the company projected that operating profit growth will begin starting in 2026. The investment opinion remains 'Buy,' with a target price of 68,000 won.

Hanwha Systems’ consolidated sales for the third quarter are estimated at 889.9 billion won (up 39.2% year-on-year), with operating profit at 44.2 billion won (down 22.5%), which is 25.4% below the market consensus (operating profit of 59.2 billion won).

Jang Namhyun, a researcher at Korea Investment & Securities, commented, “The operating loss at Philia Shipyard is expected to be similar to that of the second quarter, so we have assumed a consolidated loss of 25 billion won from new businesses.” He added, “The defense sector, which continues to improve its profitability, is projected to record 54.5 billion won in operating profit (up 17.7%).”

Hanwha Systems is expected to benefit from the expansion of the K2 tank export market. The company supplies electronic equipment for the K2 tank, accounting for about 7% of the tank’s components. This year, a contract to supply K2 tanks to Poland worth 9 trillion won was signed, and export contracts to Iraq and Romania are also being pursued.

Researcher Jang noted, “The contract volume is expected to be 250 units for Iraq and more than 200 units for Romania. As early production of the Polish K2 tanks begins in 2026 to secure production slots for 2027, Hanwha Systems’ component supply speed will also accelerate.” Based on this, he projected defense operating profit in 2026 to reach 276.9 billion won (up 31.1%).

With increased supply of K2 tank components and delivery of Cheongung-II radars to the Middle East, profitability in the defense sector is improving. At the same time, the operating loss at Philia Shipyard is also expected to decrease starting in 2026. As a result, operating profit in 2026 is forecast to reach 311.7 billion won (up 73.6%).