Samsung Securities said on the 15th that the discount to net asset value (NAV) for the surviving entity is expected to be resolved in light of Hanwha's spin-off and plan to enhance corporate value. It also raised its target price to 1.5 million won from 1.04 million won, reflecting the increased predictability of shareholder returns.
According to the spin-off plan Hanwha released the previous day, Hanwha will be split into the surviving entity Hanwha Co. and the new entity Hanwha Machinery & Services Holdings. Through this spin-off, the surviving entity will be responsible for defense, shipbuilding, energy, and finance institutional sectors, while the new entity will each handle the machinery and services institutional sectors.
The company said the partitioning was pursued to improve the efficiency of its business portfolio, describing it as a measure to increase capital allocation efficiency and resolve the chronic conglomerate discount. Beyond this spin-off, there are currently no additional plans for corporate structure reorganization.
It also disclosed plans to enhance corporate value for both the surviving and new entities. The surviving entity presented goals of achieving a 10% compound annual growth rate (CAGR) in consolidation revenue over the next five years, a 12% return on equity (ROE) target by 2030, canceling all treasury shares held, and setting a minimum dividend per share (DPS) of 1,000 won.
The new entity set targets of 30% CAGR in consolidation revenue over the next five years, executing a total of 4.7 trillion won in investments under the holding company, and paying a DPS of 1,000 won in its first year after establishment.
Park Se-woong, a Samsung Securities analyst, said, "The surviving entity Hanwha Co. is expected to see a structural resolution of its NAV discount as it carries out the spin-off and corporate value enhancement plan," adding, "Despite the spin-off, there are no factors reducing standalone cash flow, and as the predictability of shareholder returns increases, the perceived yield for holding company shareholders will improve."
Regarding the new entity Hanwha Machinery & Services Holdings, Park noted that the key will be the sustainability of its capital policy. Park said, "The company needs to present a clearer plan on how it will secure funding to meet the 4.7 trillion won investment plan it disclosed, and whether dividends that start with a DPS of 1,000 won can be sustained going forward."
Park added, "With the disclosure of the corporate value enhancement plan increasing the predictability of shareholder returns, we expect the reflection rate of subsidiary value in the holding company's share price to rise."