Hanwha Systems' Q3 operating profit beats expectations by 60%; target price of 123,000 won

[Financial News] Korea Investment & Securities maintained its Buy rating and target price of 123,000 won, saying Hanwha Systems Co., Ltd. posted results well above market expectations in the third quarter, driven by expanded defense exports to the Middle East.
In a report on the 28th, Jang Nam-hyun, an analyst at Korea Investment & Securities, said Hanwha Systems Co., Ltd. recorded consolidated revenue of 831.6 billion won in the third quarter, up 3% from a year earlier. Operating profit rose 340.4% to 99.1 billion won, 60% above the market forecast of 61.9 billion won. The operating margin was 11.9%.
The defense division's internally funded R&D costs came to 17.5 billion won, 10 billion won less than previously expected. Results were also affected by Hanwha Philly Shipyard's operating loss being classified as discontinued operations and thus excluded from consolidated operating profit.
Profitability in the defense division continued to improve. As supplies of Cheongung-II multifunction radars to three Middle Eastern countries expanded, the division's operating profit rose 52.4% from a year earlier to 76 billion won. Its operating margin was 12.3%.
Jang said, “The defense division's growth potential was clearly evident in the third-quarter results,” adding, “Profitability in the core business continues to improve not only due to one-off factors but also on the back of increased exports to the Middle East.”
He also saw a high likelihood of additional orders. The integrated air defense network project being pursued by the United Arab Emirates (UAE) is a mid- to long-term initiative to integrate air defense networks at the national level. Plans are also expected to move forward to build a multilayered defense system and link it with precision-strike systems such as the K239 Chunmoo.
Hanwha Systems Co., Ltd. is discussing participation in the project as a systems integrator that links multiple weapons systems. The analyst expected the company to expand its business beyond supplying multifunction radars to include command-and-control systems that integrate information collected from multiple detection systems, assess threats and allocate interception assets.
Korea Investment & Securities forecast that operating profit in Hanwha Systems Co., Ltd.'s defense division would grow at an average annual rate of 40.1% from 2026 to 2028 as revenue recognition for major export projects gathers pace.
Jang said, “As package-based defense exports increase, Hanwha Systems Co., Ltd.'s scope of participation in projects and order volume will also expand,” adding, “We also expect the development of future weapons systems such as Cheonggwang to open up new export markets.”

[email protected] Lee Jeong-hwa Reporter