Defense Firm’s Target Price Raised by 120%... Here’s Why [Click e-Stock]

"Hanwha Systems Diversifies Orders Beyond Air Defense"

Korea Investment & Securities maintained its "Buy" investment rating on Hanwha Systems on June 2 and raised its target price from 68,000 won to 150,000 won.

Jang Namhyeon, an analyst at Korea Investment & Securities, explained, "The target price-to-earnings ratio (PER) is based on Elbit Systems' 2028 PER, which is at the top within the global air defense missile and defense electronics sector."

Jang stated that the reason for applying this figure is because "Hanwha Systems' earnings are expected to grow the fastest among its peers." The company's estimated compound annual growth rate (CAGR) for operating profit from last year to 2028 is 99.9%, exceeding the global peer average of 33.9% by 66 percentage points. He also noted that, similar to Elbit Systems, Hanwha Systems has significant potential for regional expansion of orders. Currently, the company has secured multiple export pipelines mainly in Europe, the Middle East, and Asia, and this is expected to serve as a catalyst for future share price growth.

The expansion of Hanwha Systems' air defense network exports is, in fact, "currently in progress." Jang added, "Discussions are underway for additional exports of Cheongung-II to Qatar and L-SAM to the UAE, and the supply of multifunction radars is expected to increase in the mid- to long-term." Accordingly, he estimated the 2028 operating profit from the defense sector to reach 623.4 billion won, up 60.2% year-on-year.

He also assessed that Hanwha Systems has various growth drivers for order intake beyond air defense networks. As a supplier of CMS for warships and radars, Hanwha Systems accounts for 15% to 18% of the total cost of warship construction. The company is expected to benefit directly from naval defense exports. Hanwha Systems also supplies components for the K2 tank, with its share estimated at 5% to 8% of total contracts. New K2 tank exports amounting to 30 trillion won are expected to take place by 2027, mainly to the Middle East and Europe, and related component supply contracts are also projected to increase.

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