"Not Just About the K9" Hanwha Aerospace Expands Its Battlefield as a K-Defense Package Stock [Click eStock]

Record-Breaking Quarterly Earnings in 2Q

Expanding Export Portfolio with K9, Cheonmu, and Redback

Targeting Not Only Europe but Also the Middle East, Asia-Pacific, and US Markets

K9 self-propelled howitzer running through the Middle Eastern desert. Provided by Hanwha Aerospace.

The K9 self-propelled howitzer is considered a flagship product of Korea's defense industry. However, the growth story of Hanwha Aerospace cannot be explained by the K9 alone. The K9 has opened doors to overseas markets, followed by the Cheonmu, the Redback, and the air defense system. The business is expanding from a "self-propelled howitzer export stock" to a "K-defense package stock."

On September 15, IBK Investment & Securities newly presented a target price of KRW 1.5 million for Hanwha Aerospace and initiated a "Buy" investment opinion. The previous day's closing price was KRW 1,137,000.

In the second quarter of this year, Hanwha Aerospace recorded consolidated sales of KRW 9.2929 trillion and operating profit of KRW 1.3655 trillion. This marked the highest-ever quarterly performance, representing year-on-year increases of 47.2% and 58.5%, respectively.

At the center of these results is the land defense business. Although the sales proportion has decreased due to the consolidation of Hanwha Ocean, its contribution to profits remains overwhelming. Last year, the land defense segment's operating margin stood at 24.6%, more than double the company's overall operating margin. As of the second quarter, the order backlog for land defense reached KRW 38.3 trillion, with about 75% of this being highly profitable export orders.

More specifically, the K9 remains a core asset. Poland has finalized execution contracts for 364 units out of an initial agreement for 672, with 308 units still remaining. This year, Hanwha Aerospace supplied a K9-based platform for Spain's self-propelled howitzer modernization project, securing its first Western European export reference. As a result, the K9's reach, previously centered on Eastern and Northern Europe, has expanded to key NATO regions in Western Europe.

The path paved by the K9 is now being followed by the Cheonmu. The Cheonmu is a multiple rocket launcher system capable of operating various guided missiles. A large-scale order from Poland has positioned it as a core export product, with its reach expanding to Norway and Croatia. Notably, Norway is already a K9 operating country. Industry observers note that previous experience supplying the K9 influenced Norway's adoption of the Cheonmu, demonstrating a dynamic by which breaking into a customer once can lead to further weapons system exports.

The Redback infantry fighting vehicle, developed to meet Australian military requirements, is also emerging as a second growth driver. Hanwha Aerospace secured the Australian order after competing with Rheinmetall's Lynx. The significance lies in winning the contract based on performance rather than price competitiveness. If Hanwha Aerospace succeeds in a potential Romanian project, the Redback could become the next major export platform after the K9 and Cheonmu.

The Hanwha Group's role is also growing in the air defense systems sector. While Hanwha's estimated participation in Cheongung-II exports stands at 40-50%, its share in the long-range surface-to-air guided weapon L-SAM is expected to reach around 87%. Should Middle Eastern countries follow up their Cheongung-II purchases with L-SAM procurements, the export opportunities could increase substantially.

The stage now includes the United States. The U.S. military is reviewing next-generation self-propelled howitzer systems, and Hanwha Defense USA's K9MH has been exclusively selected as a prototype supplier. More meaningful than the sheer business size is the qualification to compete with the world's leading defense companies in the world's largest defense market.

Kim Taehyun, a researcher at IBK Securities, projected, "The long-term profit growth trend will continue, driven by increased cross-selling and maintenance (MRO) to existing customer countries, and improved export mix due to a higher export proportion."

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