Hanwha Aerospace's performance falls short of expectations, leading to differing opinions on target stock price valuation.

Hanwha Aerospace’s performance in the first quarter of this year continued the trend of profit growth but did not meet market expectations. On the 4th, securities firms generally focused more on the possibility of recovery in the second half of the year, raising target stock prices, while Dashin Securities lowered their target price due to adjusted earnings expectations and consideration of financial burdens.

Hanwha Aerospace announced on April 30th that, based on consolidated financial statements, the operating profit for the first quarter was 638.9 billion won, a 20.6% increase compared to the same period last year. Revenue was 5.751 trillion won, up 4.9%, and net profit was 525.9 billion won, a 187.5% increase. However, the operating profit was about 13% lower than the market expectation of 734.5 billion won as reported by United Information. Although the performance itself grew, what more significantly affected the stock price was whether it met the market’s pre-forecasted level, leading to differing evaluations among securities firms.

Looking at business segments, the differences are obvious. In the ground defense sector, the proportion of domestic development and maintenance sales expanded, but both domestic sales and export operating profit margins fell below expectations, burdening overall performance. Notably, some analysts pointed out that the impact was due to a reduction in export sales confirmation of the Poland K9 self-propelled howitzer and the T-150 multi-tube rocket launcher, which previously led the performance. Conversely, in the aerospace sector, increased domestic military mass production sales and international joint development-related after-sales market sales exceeding new engine sales improved profitability. The expanded contribution of Hanwha Marine’s performance was also positively evaluated.

Dashin Securities maintained a “Buy” investment opinion on the same day but lowered the target stock price from 1.88 million won to 1.75 million won. Researcher Choi Jung-hwan explained that the lower sales and operating profit compared to the market average forecast, along with lowered earnings expectations and increased net borrowings, were the reasons for adjusting the target price. Net borrowings are an indicator of the company’s actual net debt burden, and an increase in this figure can be interpreted as a heavier financial burden. However, Choi predicted that this year’s performance trend would show a “lower first half, higher second half” pattern, meaning better performance in the second half than in the first. He also commented that, given the recent increase in local production requirements in the defense order market, the company’s early securing of overseas production bases could give it an advantage in future order competitions.

In contrast, Meritz Securities raised the target price to 1.75 million won, iM Securities to 1.83 million won, New Korea Investment & Securities to 1.60 million won, Hanwha Investment & Securities to 1.80 million won, and Hana Securities to 1.86 million won. Hana Securities analyst Cai Yunxie predicted that the ground defense profit in the first quarter was likely the lowest point of the year, and over time, expectations for performance recovery and new orders would strengthen again. Overall, the market showed a dual view: one that considers Hanwha Aerospace’s sluggish first quarter as a temporary adjustment, and another cautious perspective that emphasizes the need to review financial burdens as well. This trend may become more apparent in the future depending on the confirmation of sales recovery in existing export businesses like Poland, and whether the overseas local production strategy can effectively translate into expanded orders.