Hyundai Rotem rose more than 9% early on the 1st. Analysts in the securities industry said buying appears to be flowing in on views that the defense and rail production lines are running at full capacity and the order outlook is positive.
As of 9:57 a.m. that day, Hyundai Rotem was trading at 220,500 won, up 20,000 won (9.98%) from the previous session on the Korea Exchange.
Yang Seung-yun, an analyst at Eugene Investment & Securities, explained in a report that day what was learned during a visit to Hyundai Rotem's Changwon plant on the 29th.
Yang said, "Both the defense and rail process lines are running at full capacity, and in defense, additional expansion is underway, so once orders are confirmed, I was convinced there would be no concerns about earnings growth," adding, "From the standpoint of a defense company that has no choice but to be conservative about expansion, there must be a reason it emphasized expansion."
It is also expected that additional defense export volumes will be secured going forward, that domestic needs for tank and armored vehicle production will rise, and that needs for K-2 overhauls will grow in the late 2020s. In response, Hyundai Rotem is preemptively converting two rail plants into defense plants and pushing to expand production capacity (CAPA). Based on assembly units, CAPA is projected to expand about 25% from 12 units per month to 15.
Yang added, "It was also impressive that the company was raising automation rates, such as automating welding processes, to improve quality control and expand production capacity," and "As overseas defense orders targeted for this year become visible in the second half, the stock is expected to escape its undervaluation phase."