Daol Investment & Securities said on the 20th that Hanwha Aerospace(012450) was solely selected as the prototype developer for the U.S. Army's next self-propelled howitzer program (MTC), making it highly likely to lead to full-scale production worth 10 trillion won. It maintained a "buy" rating and raised its target price 15% to 2.46 million won from 2.14 million won. The previous session's closing price was 1.177 million won.
Choi Gwang-sik, an analyst at Daol Investment & Securities, said, "Hanwha Defense USA's K9MH was solely selected as the prototype contractor for the U.S. Army's next self-propelled howitzer (Mobile Tactical Cannon, MTC) program," and added, "After performance verification, there is a very high likelihood that it will lead to full-scale production of a total of 498 guns (estimated at about 10 trillion won)."
This contract is a program to replace the U.S. Army's M777 155 mm towed howitzers, with a firm contract of $103 million (six prototype guns) and up to $262.9 million including options (up to 18 guns).
Choi said, "It carries historic significance as the first large-scale U.S. entry of Korea's flagship K-defense firepower equipment," and added, "K9, which already holds an oligopoly in the tracked self-propelled howitzer market, will rapidly expand its share into the wheeled self-propelled howitzer market through the K9MH."
Daol Investment & Securities sharply raised the final win probability of the MTC program to 90% from 10% to reflect the sole selection. Expected profits from the order pipeline increased to 11.4 trillion won from 5 trillion won, and the per-share pipeline value was also raised to 660,000 won.
Choi said the program selection could lead to additional tailwinds ahead. Choi noted, "With the MTC win, K9 variants have gained an advantageous position in the U.S. Army's program to replace the aging M109 Paladin self-propelled howitzers," and added, "Propellant businesses such as the module charge (MCS) smart factory underway in the United States will also gain momentum, enabling sustained long-term growth into the 2030s."
Choi added, "The current target price reflects only the uplift in pipeline value," and said, "If full-scale K9MH production worth 10 trillion won is confirmed around 2029–2030, we plan to further raise the target price based on higher earnings estimates for the 2030s."