With the confirmation of the second export of the K2 tank by Hyundai Rotem to Poland, the delivery of the first export batch is proceeding smoothly, improving the performance of component suppliers. The K2 tank is a weapon with about 90% Korean-made components, indicating a high level of localization. The component ecosystem is established, making it easy to accommodate the needs of the partner country, such as custom upgrades or the construction of overseas production lines.
According to the defense industry on the 4th, Hyundai Rotem delivered a total of 133 K2 tanks from the first export contract signed with Poland in 2022 until the first half of this year. The first contract stipulates that 180 K2GF (Gap Filler, meaning it will fill the gap until the introduction of the new tank) will be supplied by the end of this year.
Of the 96 tanks to be delivered to Poland this year, 49 have been sent, and the remaining quantity is scheduled for supply within the year. Of the 180 tanks in the second contract, 116 will be K2GF, while the remaining 64 will be K2PL, customized for Poland, and will be produced locally.
As Hyundai Rotem's deliveries proceed smoothly, the performance of component suppliers is also on the rise. Hanwha System produces the fire control system for the K2 tank. This system, composed of eight components including the target display, controls the cannon and sight and calculates the trajectory. This system has been installed not only on the K2 tanks operated by the Polish military but also on those used by the South Korean military.
The defense sector of Hanwha System recorded sales of 470.2 billion won and operating profit of 52.5 billion won in the second quarter of this year. This represents an improvement compared to the second quarter of 2023, before the delivery of the fire control system, which reported sales of 448.1 billion won and operating profit of 28.2 billion won. Sales from the fire control system have been reflected since the first quarter of last year.
Sales in the defense sector of HYUNDAI WIA, which produces the weapon assembly (including barrel and automatic loading device) mounted on the K2 tank, steadily increased from 185.8 billion won in 2022 to 223.1 billion won in 2023 and projected 345.2 billion won in 2024. In the first half of this year, it recorded 189.7 billion won.
HYUNDAI WIA also manufactures the weapon system for the K9 self-propelled howitzer, and plans to increase production by 40% next year as exports rise.
Medium-sized parts manufacturer Samyang Comtech produces composite armor used in the K2 tank, designed to withstand external attacks. The armor delivered to Hyundai Rotem last year accounted for 58% of Samyang Comtech's total sales. The export ratio of Samyang Comtech, which was 6.3% in 2022, expanded to 40% in 2023 and is expected to reach 41% by 2024.
In the first quarter of this year, the export ratio surpassed domestic sales. Defense industry companies improve their performance as exports increase, as the operating profit margin on export quantities is higher than that for deliveries to the South Korean military. Samyang Comtech's sales in the first quarter were 30 billion won, with operating profit of 5.6 billion won, marking increases of 37.4% and 287.3%, respectively, compared to the previous year.
The composite armor from Samyang Comtech is expected to be mounted on the K2PL, and the company is in discussions with Hyundai Rotem for the development of K2PL armor with enhanced protection. As it is expected to differ from the existing structure, the selling price is also likely to rise. The same goes for Hanwha System. A Hanwha System official noted, "The K2PL will include more electronic equipment. I think the contract size will increase."