Hana Securities projected on the 7th that Hyundai Rotem will exceed an operating profit of 1 trillion won this year with a conservative approach. Accordingly, the investment opinion is 'buy,' and the target stock price has been raised from 80,000 won to 100,000 won. The closing price for Hyundai Rotem on the previous trading day was 71,500 won.
Hyundai Rotem recorded a revenue of 1.4408 trillion won and an operating profit of 161.7 billion won in the fourth quarter of last year. This slightly fell short of the market forecast for operating profit (164.8 billion won). This was analyzed to have a significant impact on operating profit due to reflecting one-off expense provisions amounting to 140 billion won in the rail solutions institutional sector.
Wi Gyeong-jae, a researcher at Hana Securities, noted, "Excluding one-off expenses, the overall operating profit from operational activities exceeds 300 billion won," and explained, "Considering that the profit contribution from the rail solutions and eco-plant institutional sectors is minimal, it is estimated that the operating profit from the defense institutional sector was around 300 billion won."
He added, "A noteworthy point is the defense export volume led by the Poland K2 tanks," and said, "In December last year, the won-dollar exchange rate rose to around 1,470 won, which seems to have reflected the exchange rate effect; nevertheless, an astonishingly high profit margin was achieved."
Hana Securities projected Hyundai Rotem's annual performance for next year to be a revenue of 6.3283 trillion won and an operating profit of 1.0197 trillion won. Wi noted, "Considering the export profitability shown in last year's fourth-quarter results, the performance estimates are further raised," but added, "If we reflect the possibility of exchange rate declines and volume reductions, the operating profit would be around 87.52 billion won."
On the same day, JP Morgan also raised its target stock price for Hyundai Rotem from 71,000 won to 100,000 won and maintained an overweight position. JP Morgan evaluated, "Hyundai Rotem achieved an operating profit margin of over 40% in defense exports due to the effects of the exchange rate and cost reduction efforts."