"Hanwha Systems to Benefit from Expansion of European Air-Defense Networks; Medium- to Long-Term Growth Expected": DB Securities

[Financial News] Hanwha Systems is diversifying its routes into the North Atlantic Treaty Organization (NATO) market by leading with air-defense radars. The company is expected to sustain medium- to long-term growth by expanding its business into space and U.S. maritime defense.
DB Securities researcher Seo Jae-ho said on the 4th, "Build-up efforts to enter the European market are progressing on multiple fronts," forecasting that related orders will gradually become visible amid a global shortage of air-defense systems.
Hanwha Systems is also accelerating cooperation with local companies. It signed a memorandum of understanding (MOU) with German defense contractor Diehl Defence to supply multifunction radars (MFRs) for the IRIS-T SLM air-defense system included in the European Sky Shield Initiative (ESSI). The company is pursuing a dual strategy of direct exports through L-SAM and M-SAM radars and indirect exports through collaboration with European defense companies.
Seo analyzed, "Western countries must defend against both drone swarms and ballistic-missile threats at lower and upper tiers, respectively, so demand for radars will inevitably remain strong."
In addition to air-defense systems, ground-defense products such as the K9 self-propelled howitzer, K2 tank, and Redback infantry fighting vehicle, as well as naval products including unmanned vessels and warships, were cited as additional growth drivers. Hanwha Systems supplies radars, electronic and sensor systems, and command-and-control systems for various weapons platforms. This could allow increased orders by frontline defense contractors to translate into stronger results. Seo explained, "Expectations for orders from frontline contractors in ground defense and naval sectors are rising in the second half of the year," adding, "Hanwha Systems has a presence across a broad range of weapons systems amid the global trend of expanding defense budgets, so medium- to long-term expansion of its business scale is expected."
The defense business also has strong long-term growth potential, according to the researcher. Seo estimated that Hanwha Systems' defense-business revenue would rise from 2.439 trillion won last year to 2.967 trillion won this year, 3.376 trillion won in 2027, and 3.724 trillion won in 2028. Over the same period, operating profit in the defense business is expected to increase from 229 billion won to 436 billion won.
Space and U.S. maritime defense are also emerging as new growth pillars. Seo forecast that satellite projects led by the Ministry of National Defense and the Korea AeroSpace Administration would take concrete shape, beginning with the selection of operators for a 40-satellite, multi-agency small synthetic-aperture radar (SAR) satellite project in the third quarter. The company’s potential entry into the U.S. defense market, including orders for MRIVs through Hanwha Philly Shipyard (HPSI), also remains viable. Seo stated, "The company still has various growth catalysts spanning space, shipbuilding, and defense."



[email protected] Won-il Jung Reporter