Target Price Lowered but 65% Upside Remains... The Stock Analysts Say 'Buy' [Click eStock]

On September 2, KB Securities lowered its target price for Hyundai Rotem from 2.7 million won to 2.25 million won, reflecting a decline in the exchange rate, among other factors. The investment rating was maintained at 'Buy.'

Jeong Dong-ik, a researcher at KB Securities, stated, "We are revising down our target price by 16.7% from the previous level, reflecting delays in the follow-on export contract for the K2 tank, revisions to earnings estimates due to a lower exchange rate, and changes in valuation among peer groups." He added, "Despite lowering the target price, we are maintaining our Buy rating as, due to the recent stock price weakness, there remains a 65.2% upside potential compared to the closing price at the end of last month."

KB Securities expects the K2 tank export contract with Peru to have a very high likelihood of being finalized within this year. Jeong said, "A hint is the July 23 order disclosure from M&C Solution, which supplies key components like the servo valve and traverse device for the K2 tank. According to its announcement, M&C Solution entered into a sales and supply contract with Hyundai Rotem valued at over 5% of last year’s sales (20.17 billion won)." He continued, "Given that M&C Solution supplies parts worth 300 to 400 million won per K2 tank, the order volume would be for 50 to 60 tanks, with the delivery deadline by the end of this year. Therefore, it cannot be a contract with Romania or Iraq, where order sizes exceed 200 units. The only remaining possibility is Peru."

The Peru contract has seen delays since the signing of the Master Agreement in December last year, mainly due to complicated local political schedules such as the presidential election and transition of government, as well as budget issues. However, the inauguration of the new administration at the end of July is expected to revive its momentum. Jeong commented, "Peru is seeking a contract for a total of 195 vehicles, including 54 K2 tanks and 141 K808 wheeled armored vehicles, worth about 2 to 3 trillion won. At the very least, some portion of the deal is likely to be contracted within this year."

The Poland EC-3 contract, initially expected next year, is now also projected to have its contract procedures start within this year. Jeong explained, "The EC-3 contract is expected to surpass the 9 trillion won scale of the previous EC-2 deal, which included 64 K2PLs and 81 units of related tanks for a total of 261 vehicles." He added, "Even if the final contract is not completed within this year, the procedures necessary for the contract could still begin within this year."

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