Hyundai Motor Securities on the 19th said Hyundai Rotem will break out of undervaluation in the second half of this year through K2 tank orders worth 3 trillion won from Peru and 9 trillion won from Iraq. It maintained a "buy" (BUY) rating and raised the target price 13.6% to 284,000 won from 250,000 won. The previous session's closing price was 211,500 won.
Hyundai Motor Securities analyzed that as global tank production capacity has entered a bottleneck phase, Hyundai Rotem's delivery competitiveness for the K2 is standing out. Unlike rivals with limited annual capacity, Hyundai Rotem has been continuously expanding its K2 production capacity.
In the defense solutions segment, this year's order targets are Iraq (9 trillion won) and Peru (3 trillion won).
Baek Ju-ho, an analyst at Hyundai Motor Securities, said, "We will deliver the Iraq-destined K2ME and proceed with mobility tests and desert climate tests," noting, "As the cabinet formation is completed, export talks will accelerate."
Baek added, "In Peru (54 K2 tanks and 141 K808s), we signed a master supply agreement in December and expect to proceed to the main contract after the presidential election concludes."
Next year, the company is targeting orders for Poland's EC3 and Romania's K2 tanks. Baek said the company is in talks with numerous countries, including in Northern Europe, Canada, and Asia and Africa.
Baek said, "Compared with Germany's Leopard, with CAPA of about 36 units a year, and the United States' Abrams, with CAPA of about 60 units a year, the company's CAPA is overwhelming," adding, "In the rail solutions segment, K2 production capacity has also increased 25%, and it performs well in maintenance, operation, and performance."
Baek projected that in the rail solutions segment, profitability will improve starting in the second half as the share of low-margin domestic projects declines and revenue is recognized from overseas projects such as LA Metro. He also forecast that for the New York subway car project in the United States (a base 1,140 cars, plus 1,250 cars in options, totaling 2,390 cars), results will come between after the September bid and late this year to early next year.