DAISHIN SECURITIES noted on the 16th that Hyundai Rotem's operating profit margin for defense exports in the first quarter of this year is estimated to be remarkable. It is estimated at 36.9%. The target stock price has been raised by 20% from the previous 150,000 won to 180,000 won, and the investment opinion remains "buy."

The exhibition hall of Hyundai Rotem at the 10th International Defense and Disaster Prevention Technology Exhibition, which opened in Peru on Oct. 24 (local time). The K2 tank is on display./Courtesy of Hyundai Rotem

Hyundai Rotem recorded consolidated sales of 1.1761 trillion won and operating profit of 202.9 billion won in the first quarter. This represents increases of 57.3% and 354.1%, respectively, compared to the same period last year. Sales in the defense institutional sector were 658 billion won, indicating a slight decrease compared to the previous quarter due to fewer operating days in the first quarter; however, the export ratio has exceeded 70% for three consecutive quarters. The operating profit margin is estimated to be at the level of 33% recorded in the fourth quarter of last year.

Lee Tae-hwan, a researcher at DAISHIN SECURITIES, explained, "It is estimated that a remarkable level of revenue has continued," and noted, "The rail institutional sector, which recorded an operating loss in the previous quarter, has also shifted to a profit."

DAISHIN SECURITIES anticipates that Hyundai Rotem's growth trend will continue. In particular, the factors delaying the K2 2-1 contract with Poland have been resolved, and considering the continuous production for the remaining quarters, it is expected that the signing of the contract is imminent. The estimated export scale is 60 units for 6 billion dollars (approximately 8.4 trillion won).

The researcher evaluated, "The excellent revenue has been proven, and if the contract with Poland is realized, the medium-term growth trend is expected to be maintained," adding, "Business opportunities in Eastern Europe, such as Romania and Slovakia, are also sufficiently visible."