Securities firms are lowering their target prices for Hanon Systems one after another. They said the roughly 900 billion won rights offering will significantly dilute shares, and the outlook for earnings in the second half is also uncertain.
Kaum Securities said on the 25th that, regarding Hanon Systems' roughly 900 billion won rights offering decision, if a turnaround to profit is not achieved, the justification for the rights offering could be greatly diluted.
Earlier, Hanon Systems, an affiliate of the Hankook & Company Group, disclosed on the 23rd that it had decided on a 900 billion won shareholder-allotted rights offering. It plans to issue 347.5 million new shares at 2,590 won per share, equivalent to 51% of the total number of shares currently outstanding. Most of the funds secured will be used for debt repayment.
Shin Yun-chul, a researcher at Kiwoom Securities, said, "If a turnaround to profit is impossible even with debt repayment through a rights offering, the rationale for executing the rights offering will inevitably be greatly diluted," adding, "Ultimately, reducing interest expenses is key to resolving Hanon Systems' net loss structure."
Shin said shareholders' wait is getting longer as profits and losses worsen due to the rights offering, global restructuring, and a rapid shift in the capitalization rate of research and development (R&D). Management is confident about turning a profit, but he noted the stock closed lower the previous day because improvement in results has not been confirmed.
He said, "In the second half of this year, additional restructuring expenses may arise, and the burden will likely grow due to prolonged tariffs on automobile parts and aluminum exports to the United States," and lowered the target price from 3,500 won to 3,300 won. In the previous session, Hanon Systems' share price fell more than 3% to close at 3,075 won.
The previous day, Kim Jun-sung, a researcher at Meritz Securities, also expressed concern, saying, "Since most of the capital secured through the rights offering will go to reducing borrowings, there will be no change in operating competitiveness," adding, "Per-share value dilution from the new share issuance amounts to -34%." He then cut the target price to 3,000 won, below the previous day's closing price.