NH Investment & Securities evaluated that as security threats in the Middle East escalate, the speed of negotiations for weapons system contracts with Middle Eastern countries is expected to increase. The investment opinion remains 'buy,' and the target price has been raised by 29% to 68,500 won from the previous estimate. Hanwha System's closing price on the previous trading day was 58,900 won.
Hanwha System is expected to deliver strong results in the second quarter of this year as defense exports increase.
Researcher Lee Jae-gwang of NH Investment & Securities said, 'Especially, orders for the ground-to-air defense system (Cheongung-II, L-SAM) are anticipated,' adding, 'Hanwha System is currently producing multifunctional radars for this system.'
If 10 batteries are ordered based on the Cheongung-II, about 1 trillion won in orders are expected.
This researcher noted, 'Orders for the K2 tank are also possible, as Hanwha System is producing the fire control system for the K2 tank,' estimating that the price per unit is approximately 1.5 billion won.
This researcher added that Middle Eastern countries prefer South Korean weapons systems because they have fewer political burdens associated with weapon imports, while also offering excellent cost-effectiveness compared to comparable systems and faster delivery times.
Hanwha System's operating profit for the second quarter of this year is expected to be around 81 billion won. This represents a 4% decrease compared to the same period last year, but a 40% increase compared to the previous quarter.
This researcher said, 'Similar to the first quarter, the increase in exports from the defense institutional sector is expected to be a driving force for performance improvement.'