Daol Investment Securities has raised its target price for Hanwha Aerospace from 2.04 million won to 2.14 million won, reflecting expectations for increased system deliveries and large-scale overseas orders in the second half of the year. The firm maintained its 'buy' rating.
Choi Kwang-sik, a researcher at Daol Investment Securities, stated, "Despite the absence of large-scale system deliveries in the second quarter, the performance was supported by parts and ammunition deliveries. As system deliveries ramp up in the second half, we expect seasonal performance improvements. There are various order pipelines waiting, including the K9 self-propelled howitzer, Cheonmu, as well as armored vehicles for the Middle East and long-range surface-to-air missiles (L-SAM)."
Hanwha Aerospace reported second-quarter revenues of 9.2929 trillion won and an operating profit of 1.3655 trillion won, marking increases of 47% and 53%, respectively, compared to the same period last year. The operating profit significantly exceeded the market consensus of 1 trillion won.
The strong performance was driven by improvements in major subsidiaries such as Hanwha Ocean and Hanwha Systems. In the ground defense sector, despite low export statistics for finished products, consistent deliveries of K9 self-propelled howitzer parts and ammunition led to better-than-expected results. The ground defense sector recorded revenues of 2.1075 trillion won and an operating profit of 533 billion won.
Daol Investment Securities anticipates that revenues from the K9 EC2 project in Poland will be fully reflected in the second half, and projects in Egypt and Australia will progress smoothly, leading to stronger performance compared to the first half of last year.
The momentum for overseas orders is also expected to continue. Key potential orders include the Spanish self-propelled howitzer project, the U.S. self-propelled howitzer modernization project, the K9 EC3 in Poland, and the Saudi Arabian Ministry of National Guard (MNG) project. Additionally, ongoing discussions for the second phase of the Romanian project and L-SAM supplies to the Middle East and Europe, as well as K9 and Cheonmu export negotiations with European countries, are underway.
Choi added, "We also expect an expansion in ammunition supply to Europe due to the domestic propellant factory expansion, and a propellant factory is scheduled to begin construction in Arkansas, USA, in 2027."
* This article has been translated by AI.
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