Samsung Securities said on the 13th that for Hyundai Rotem, with solid finances and continued profit growth, the factors behind its undervaluation are expected to ease. It maintained its Buy rating and raised the target price to 292,000 won from 280,000 won. Hyundai Rotem closed at 210,000 won in the previous session.
Han Young-su, an analyst at Samsung Securities, said, "Hyundai Rotem is trading at 23 times price-earnings ratio (PER) for 2026, which is a steep discount compared with the domestic large defense stocks' average of 39 times," adding, "Compared with competitors, the valuation discount (a state in which the share price is evaluated as low relative to corporate value) is excessive."
Shares of major domestic defense stocks have risen 20% since the Iran situation. Samsung Securities analyzed that the market viewed the defense industry as a relatively safe investment alternative amid geopolitical conflicts. But Hyundai Rotem's share price fell 8.89%, from 230,500 won on Feb. 27, before the Iran war, to 210,000 won at the close on the 10th.
Han said, "It was left out of expectations for benefits from the increase in the U.S. defense budget that triggered the rebound in defense stocks early in the year, and there was a lack of company-level news that could draw the market's attention," adding, "There were concerns that within Middle Eastern countries' defense budgets, the priority of tank purchases could be pushed back by air defense network expansion."
However, Han also said that it should be considered that benefits for domestic companies from the increase in the U.S. defense budget are not yet certain, and that the various news that drew attention to competitors are still at a scenario stage requiring verification. In addition, since most potential purchasing countries in the Middle East, excluding Iraq, are in sound fiscal condition, and because it is in fact difficult to increase the supply of air defense weapons in the short term, the investment appeal of Hyundai Rotem remains high.
Meanwhile, Hyundai Rotem's net cash increased 175% last year.
On this, Han added, "The accumulated cash will ultimately lead to investment in new businesses for growth and capacity expansion, easing the valuation discount," and "It is unlikely that the tank delivery volume to Poland will decrease, and the exchange rate is also favorable, so full-year results this year will continue meaningful growth."