[Click e-Stock] "Hanwha Aerospace, Temporary Weakness... Earnings Improvement Trend Intact"

Fourth-quarter results fall short of market expectations
Large order backlog suggests only temporary weakness

On February 11, Kiwoom Securities stated that although Hanwha Aerospace's operating profit for the fourth quarter significantly undershot market expectations, it views this as a temporary growing pain, and therefore maintained its "Buy" investment rating and target price of 1.65 million won.

Han-Gyeol Lee, an analyst at Kiwoom Securities, said, "Hanwha Aerospace's operating profit for the fourth quarter came in at 752.8 billion won, falling far short of market expectations," and explained, "Shipments of K9 and Cheonmu howitzers to Poland remained solid, but the regional mix deteriorated due to a decline in other overseas sales and an increase in domestic sales."

Lee noted, "As of the end of last year, the order backlog stood at 37.2 trillion won, equivalent to four years' worth of work going forward," and emphasized, "In 2026, shipments of K9 and Cheonmu to Poland will decrease, but the earnings improvement trend will remain intact as sales of parts and the K9 projects in Australia and Egypt enter full swing."

Kiwoom Securities forecasts Hanwha Aerospace's sales this year at 29.5795 trillion won (up 11.2% year-on-year) and operating profit at 3.8227 trillion won (up 26% year-on-year, with an operating profit margin of 12.9%). Lee said, "We still believe that subsidiaries in the land defense segment and the shipbuilding segment will serve as the main drivers of earnings growth," adding, "This year, 30 K9 units and more than 40 Cheonmu units are scheduled to be delivered to Poland in the land defense segment."

He continued, "Considering that last year's deliveries to Poland were 82 K9 units and 90 Cheonmu units, the number of units delivered to Poland will decline sharply this year, but exports of ammunition and other parts, along with the K9 projects in Egypt and Australia entering full swing, will allow the sales and profit growth trend in the land defense segment to continue." He added, "As overseas business accounts for more than 70% of the order backlog, solid profit growth is expected."

This content was produced with the assistance of AI translation services.