Kiwoom Securities said that Hanon Systems is expected to diversify its pipeline by entering the energy storage system (ESS) thermal management field, proposing it as the next player in Hyundai Motor Group's rally within the auto sector. It raised its target price to 5,200 won from 4,834 won. The previous session's closing price was 3,180 won.
Shin Yun-cheol of Kiwoom Securities said, just as Hyundai Motor's multiple rerating was triggered by the crystallization of the physical AI new business, the non–Hyundai Motor Group names will also need pipeline diversification before a discussion of corporate value gains can truly begin. As the company is discussing diversification of its thermal management line, including entry into the ESS thermal management field, if a new business model that captures group-level synergies is unveiled through the fourth-quarter earnings announcement this year, a turnaround in results and a shift in share-price direction are expected.
It also viewed positively that the financial structure improved thanks to a recently conducted paid-in capital increase. Shin said, as a result of the paid-in capital increase, 983.4 billion won in cash was paid in, and 883.4 billion won was used for liability repayment, so the liability ratio will shrink from 246% in the third quarter of 2025 to below 170% in 2025. Accordingly, annual interest expense will be reduced by about 50 billion won from a year earlier, and a net profit turnaround is expected.
It also viewed the overhang risk as limited. Shin said that because the rights offering was undersubscribed, NH Investment & Securities, the lead manager, acquired about 71 million shares, which was perceived as an overhang risk and caused Hanon Systems' share price to lag the recent 29.6% rise of the KRX Auto Index. However, the shares in question have no separate lock-up period, and from the lead manager's perspective, the stake was not acquired for arbitrage transaction purposes, so the risk is expected to dissipate quickly.
Meanwhile, Shin estimated Hanon Systems' fourth-quarter revenue last year at 2.65 trillion won and operating profit at 90.2 billion won. That would be up 4.6% and 5.3% from a year earlier. It also exceeds the market consensus operating profit of 75.8 billion won.