Hanwha Systems Faces Philly Shipyard Cost Burden but Remains "Key to MASGA" [Click e-Stock]

Hanwha Systems has emerged this year as a leading stock in the domestic market, spanning both the shipbuilding and defense sectors. This is because the company develops and manufactures electronic equipment for defense, such as radar and combat systems, and also holds a stake in Philly Shipyard.

On November 4, Daishin Securities raised its target price for Hanwha Systems from 67,000 won to 71,000 won, noting that despite the burden of investment costs in Philly Shipyard, the company is expected to become a key investment stock when MASGA (Make America Shipbuilding Great Again) is fully implemented in the future.

Currently, Hanwha Systems operates mainly in the defense sector, focusing on surveillance and reconnaissance, command and control, avionics, marine systems, and satellite businesses. It also engages in the ICT sector, building business information systems and managing and operating customer IT systems.

In the defense sector, Hanwha Systems is well known for developing the Active Electronically Scanned Array (AESA) radar for the KF-21 fighter jet. The company also claims to have the capability to independently develop submarine combat systems. As part of its new businesses, Hanwha Systems is investing in overseas satellite communication companies and building cooperative partnerships after acquiring equity stakes, as well as pursuing Urban Air Mobility (UAM) projects.

According to the consolidated financial statements announced by Hanwha Systems on October 31, the company posted provisional third-quarter sales of 807.7 billion won and operating profit of 22.5 billion won. Compared to the same period last year, sales increased by 26.4%, but operating profit decreased by 62.7%. The provisional figures fell short of market consensus. This was interpreted as a result of increased initial investment costs related to the U.S. Philly Shipyard.

Philly Shipyard, in which Hanwha Systems holds a 60% stake, is expected to face inevitable increases in investment costs for the time being. However, as U.S. President Trump has mentioned that Korea’s nuclear-powered submarines will be built at Philly Shipyard, the facility is likely to become a key base for MASGA.

Lee Taehwan, an analyst at Daishin Securities, said, "There are many prerequisites for building nuclear-powered submarines, such as obtaining a defense license for Philly Shipyard and facility investment plans, so immediate implementation is difficult. However, since Hanwha Systems owns Philly Shipyard as a consolidated subsidiary, it will become a core investment stock if MASGA investment is pursued. While the current investment costs are disappointing, the potential remains substantial."

Yonhap News Agency