Combined sales of five domestic defense contractors -- Hanwha Aerospace, Poongsan, Hyundai Rotem, Korea Aerospace Industries (KAI), and LIG Nex1 -- are estimated to grow 25.5 percent year-on-year to 6.4 trillion won ($4.6 billion) in the April-June period, with operating profits surging 106.6 percent to 521.9 billion won.
"As the conflict and tensions in Europe and the Middle East persist, many countries are maintaining their trend of increasing military spending," said Lee Dong-hoon, an analyst at Shinhan Securities. He expects Korean defense firms to experience steady growth due to expanded exports to Europe.
Hanwha Aerospace is projected to post 2.555 trillion won in revenue and 205.9 billion won in operating profit, up 2.1 percent and 148.4 percent, respectively, from the same quarter of 2023.
On Wednesday, the company announced it had finalized a 1.3 trillion won contract with Romania's defense ministry to supply 54 K9 howitzers, 36 K10 Ammunition Resupply Vehicles (ARVs) and ammunition. The news drove its stock up 1.79 percent to 256,500 won on the day.
Poongsan's revenue and operating profit are estimated at 1.267 trillion won and 127.1 billion won, increasing 22 percent and 136 percent, respectively. Poongsan develops and supplies all types of ammunition, from 5.56 mm small-caliber rounds to 155 mm howitzer shells. The company is pursuing a project to double its 155 mm howitzer shell production capacity by 2025.
KAI is expected to increase its revenue by 24.4 percent to 912.6 billion won and its operating profit by 558.3 percent to 55.3 billion won. The sole aircraft manufacturer in Korea has exported urban air mobility (UAM) parts and the Korean transport utility helicopter Surion.
Hyundai Rotem's revenue is projected to edge down 0.43 percent to 982.6 billion won, but its operating profit is expected to swell 16.7 percent to 78.6 billion won. In June, the defense firm unveiled the 4th-generation HR-Sherpa, a multipurpose unmanned vehicle designed for deployment in operations to replace soldiers.
LIG Nex1's revenue and operating profit are also expected to jump 26 percent and 37 percent, reaching 686 billion won and 55.2 billion won, respectively. The growth can be attributed to its export contracts for the medium-range surface-to-air missile Cheongung-II with the United Arab Emirates and Saudi Arabia, worth 2.7 trillion won and 4.3 trillion won, respectively.
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