Korea Investment & Securities said on the 3rd that while Hanwha Systems' results are weak this year, profit improvement is expected to begin next year. It maintained a target price of 68,000 won and a "buy" rating. Hanwha Systems' closing price in the previous trading day was 59,900 won.
Hanwha Systems posted consolidated third-quarter revenue of 807.7 billion won, up 26.4% from a year earlier, and operating profit of 22.5 billion won, down 60.5%. Operating profit missed the market estimate by 52.1%.
The impact was largely due to a 38.8 billion won operating loss at subsidiary Philly Shipyard. Jang Nam-hyeon, an analyst at Korea Investment & Securities, said, "As one-off expenses from initial investments for normalizing Philly Shipyard were reflected, results fell well short of market expectations."
In the defense division, revenue and operating profit came in at 481.4 billion won and 49.8 billion won, up 2.9% and 7.6% from a year earlier, respectively. The share of high-margin overseas sales is estimated at 18%, and the third-quarter operating margin for defense export business is estimated at over 25%. Net income attributable to controlling shareholders was 151.7 billion won, beating the market estimate by 153.2%.
Korea Investment & Securities estimated that investment expenses for the initial normalization of Philly Shipyard will also be recognized in the fourth quarter this year. Accordingly, operating profit this year is projected to be 159.8 billion won, down 27.1% from last year.
Jang said, "With 2026 as the inflection point when Philly Shipyard's operating losses narrow, operating profit will improve," adding, "Next year's operating profit is expected to be 296.3 billion won, up 85.4% from a year earlier."
However, a conservative approach is seen as necessary regarding the size of Philly Shipyard's operating loss. Conversely, the high profitability of the defense division, centered on export business, continues. Jang said, "As the share of high-margin overseas sales increases, the defense division's operating profit will reach 274.2 billion won next year."