Korea Investment & Securities noted on the 30th that the recognition of expenses for the normalization work of the Philippine shipyard will continue until the second half of this year. Accordingly, the estimated operating profit for this year was also downgraded by 17.5% compared to previous estimates. However, the target stock price remains at 68,000 won, and the investment opinion continues to be "buy."
Hanwha System's consolidated revenue for the second quarter of this year was 768.2 billion won, with an operating profit of 33.5 billion won. Compared to the same period last year, revenue increased by 11.8%, but operating profit decreased by 58%. Compared to market expectations (consensus), revenue and operating profit were 56.3% and 15.5% lower, respectively.
The poor performance of Hanwha System in the second quarter was attributed to an operating loss of 29.2 billion won from its consolidated subsidiary, the Philippine shipyard. Revenue from the Philippine shipyard increased by 35% compared to the previous quarter, but it is in a situation where expenses must be incurred to support local personnel and normalize the aging shipyard.
During the earnings announcement conference call on the 29th, Hanwha System explained, "The second quarter is a turning point for securing capabilities, such as normalizing the factory," and noted, "There are aspects where significant improvements in performance will be difficult in the third quarter as the Philippine shipyard is at a recovery stage."
Investments in the Philippine shipyard are expected to continue until the second half of this year, impacting Hanwha System's performance. Korea Investment & Securities projected operating profit for Hanwha System to decrease by 7.2% to 203.7 billion won compared to the previous year.
However, beginning next year, as the size of the operating loss of the Philippine shipyard decreases, a rebound in performance is anticipated. The expected operating profit for next year is forecasted to be 312.7 billion won, which represents a 53.6% increase from this year.
Jang Nam-hyun, a researcher at Korea Investment & Securities, stated, "A conservative approach is necessary regarding the size of the operating loss of the Philippine shipyard," and added, "However, the high profitability of the defense institutional sector is expected to continue, and with the acceleration of revenue recognition in the export business starting next year, revenue is estimated to increase significantly."