[Click e-Stock] "Hanwha, Discount Rate Shrinks After Spin-Off... Target Price Raised"

Mirae Asset Securities Raises Hanwha Target Price to 185,000 Won

On August 26, Mirae Asset Securities raised its target price for Hanwha from 107,000 won to 185,000 won, reflecting a reduction in the discount rate following its spin-off, while maintaining its 'Buy' investment opinion.

On August 1, through the spin-off, five entities—Hanwha Vision, Hanwha Galleria, Hanwha Hotels & Resorts, Hanwha Momentum, and Hanwha Robotics—along with 100 billion won in cash, were transferred to the newly established entity Hanwha Machinery & Services Holdings. The spin-off ratio was approximately 0.76 to 0.24, and the surviving entity and the new entity were relisted and newly listed, respectively, the previous day. Substantially all interest-bearing debt remains with the surviving company.

The surviving entity will continue to own the core group subsidiaries in defense, shipbuilding, energy, and finance, while maintaining its existing construction and global businesses. Approximately 80% of the listed subsidiaries' value is concentrated in Hanwha Aerospace, resulting in a restructuring centered on defense and shipbuilding.

Mirae Asset Securities calculated the surviving entity's net asset value (NAV) at 18.1244 trillion won. This figure adds the attributable value of the three listed companies (22.878 trillion won) to capitalized brand royalty (1.705 trillion won), and subtracts adjusted net borrowings (5.453 trillion won) as well as headquarters expenses and preferred stock.

The company assumed the discount rate would decrease from 54.95% observed immediately before the trading halt on July 29 to 50.85% over 12 months. Analyst Ryu Jehyeon of Mirae Asset Securities explained, "The transfer of all non-listed subsidiaries structurally reduces the discount factors," adding, "Because there is also an adjustment in the number of shares following the spin-off, we are raising the target price accordingly."

Ryu also cautioned, "One point to note is the price immediately after the relisting," noting, "On July 29, the discount rate based on closing price and theoretical price was 75.8%, which is higher than before the split." He elaborated, "This is an arithmetical asymmetry, as the five transferred companies accounted for 7.0% of NAV but their split ratio was 24.4%."

Hanwha posted a record consolidated operating profit of 2.4085 trillion won in the second quarter, up 80% year-on-year. Mirae Asset Securities expects that, with changes to the consolidated scope in the second half, increased profits in defense and shipbuilding will offset the reduction from the transferred entities.

It was further predicted that shareholder value would be enhanced, citing the fact that funds for shareholder returns remain with the surviving entity, as well as disclosed plans for a minimum dividend of 1,000 won per share and the cancellation of treasury shares and preferred stock.

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