Eugene Investment & Securities said on the 30th that while momentum in each of the shipbuilding, space, and defense sectors is sufficient for Hanwha Systems, the key will be to realize it and justify the valuation. The firm maintained a "Buy" rating and raised its target price to 140,000 won from 67,000 won. Hanwha Systems' closing price in the previous session was 118,100 won.
Hanwha Systems posted first-quarter revenue of 807.1 billion won and operating profit of 34.3 billion won this year. Compared with a year earlier, revenue rose 17% and operating profit increased 2%. Operating profit missed the market consensus average of 58.3 billion won.
Yang Seung-yun, an analyst at Eugene Investment & Securities, said, "The shortfall versus operating-profit expectations was largely due to losses at the Philly Shipyard," noting, "Wrap-up work has concentrated on low-margin vessels such as the 'National Security Multi-Mission Vessel (NSMV),' and winter work stoppages were a drag."
The new business segment, which includes the Philly Shipyard results, recorded an operating loss of 48.1 billion won.
However, Yang said, "Recognition of revenue from high-margin vessel types (CV) will also ramp up within the year, narrowing losses," adding, "Capacity expansion is also continuing (currently 1–1.5 ships; +2–3 ships through productivity improvements at four docks; +3–4 ships through activation of five docks), and the payoff from investments is approaching."
The defense segment is maintaining its growth trajectory, with operating profit up 37% year over year to 69 billion won. Orders account for 30% of revenue. This reflects an increase in percentage-of-completion revenue from Cheongung multi-function radar (MFR) projects for the United Arab Emirates (UAE) and Saudi Arabia.
Yang said, "Considering domestic business margins, export margins are estimated at about 30% or more," adding, "Domestic mass-production businesses remain solid with deliveries of KF-21 active electronically scanned array (AESA) radars, and with domestic mass production increasing, the annual export ratio is expected to come in around 20%."
The space segment plans to strengthen its business capabilities around the Jeju Space Center, which was completed last year. Current satellite production capacity (CAPA) is about two per month, but the mid- to long-term goal is around 100 per year. The flagship SAR satellite with 0.25-meter-class resolution is slated for launch within the year.
Yang analyzed, "It is also positive that opportunities in Korea's public satellite programs—such as the selection of a small-satellite system operator scheduled for the second half, as well as public-agency satellites and multi-purpose practical satellites—are increasing," adding, "Overseas satellite cooperation is also coming into view."
Among these, the defense business is seen as having the greatest potential. Considering the export pipelines of domestic defense companies operating this year—KF-21 (Indonesia, UAE, Philippines), K-2 (Iraq, Peru, Romania, Poland EC-3), ground defense (Saudi Arabia), M-SAM (Qatar), LSAM (UAE), submarines (Canada, Saudi Arabia), and surface ships (Estonia)—Hanwha Systems is also expected to benefit in tandem, with overseas orders rising sharply.
Yang added, "As cooperation outcomes with overseas companies such as Germany's Diehl Defence and Italy's Leonardo S.p.A. take concrete shape within the year, they are expected to be added as growth drivers after 2027."