Hyundai Rotem's stock has dropped more than 11% due to concerns over weak third-quarter earnings and delays in defense export contracts. The company's operating profit fell short of market expectations, raising worries about its growth potential. Securities firms have also lowered their target prices for the stock.
As of 9:46 a.m. on the Korea Exchange, Hyundai Rotem shares were trading at 89,000 won, down 11.62% from the previous trading day. The stock opened at 97,900 won but quickly lost ground.
The company's third-quarter earnings report, released the previous day, did not meet market expectations, dampening investor sentiment. Hyundai Rotem reported an operating profit of 247.1 billion won, an 11% decrease compared to the same period last year, and about 10% below the market forecast of 273.7 billion won.
Analysts have raised concerns not only about the disappointing earnings but also about delays in defense export contracts and the company's long-term growth prospects.
Mirae Asset Securities noted, "The third quarter continues to see delays in contract signings due to geopolitical risks and financial issues in potential client countries. The possibility of delays in expected contracts for exports to Peru in the second half of the year is particularly disappointing," and lowered its target price by 4% to 160,000 won.
Shinhan Investment Corp. stated, "Even without new export contracts, we expect defense sales next year to be similar to this year's levels. Changes in the product mix, with a larger share of domestic defense sales and currency effects, may lead to a slight decrease in operating profit compared to this year, but we anticipate a recovery in sales in 2028 due to confirmed production volumes and new orders." However, it set its target price at 150,000 won, down 34.8% from the previous 230,000 won.
Samsung Securities remarked, "Hyundai Rotem's recent stock performance has been the weakest among major domestic defense stocks," attributing this to concerns about the sustainability of its strong profit margins and growth potential. The firm noted that these concerns stem from ongoing delays in securing additional export contracts and underwhelming results from projects expected to drive future growth, such as the development of multipurpose unmanned vehicles and long-range missile systems for the KF-21. It lowered its target price to 156,000 won.
* This article has been translated by AI.
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