The author is an analyst for NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com -- Ed.
Hanwha Corp’s in-house businesses have been resettled as construction, global, and momentum. The expansions of its green energy/materials and high-value added new ventures are to usher in earnings growth. EV is to climb on the acquisition of Hanwha Ocean and a value uptick for subsidiary Hanwha Aerospace (integration of the group’s defense business). Hanwha Corp’s shares are trading at a 56% discount to NAV.
Completes business portfolio reorganization
Moving ahead, Hanwha Corp plans to fully promote its eco-friendly and high value-added new businesses. The global division is aiming to strengthen its IT materials business, including eco-friendly energy sources/materials such as ammonia and hydrogen, rechargeable battery materials, and semicon materials. And, the momentum division is to bolster its eco-friendly energy process equipment business, including solar and rechargeable battery ventures.
The momentum division has established Hanwha Robotics via the spin-off of collaborative robot and mobile (autonomous guided vehicle, autonomous mobile robot) businesses. And, focusing its capabilities on solar energy and rechargeable battery pursuits, Hanwha Corp is withdrawing previous plans to acquire Hanwha Precision Machinery, and it is transferring its semiconductor pre-processing domain over to Hanwha Precision Machinery.
Although adhering to a Buy rating, we lower our TP from W40,000 to W33,000, reflecting both changes in share prices for listed subsidiaries and downward revisions to our earnings estimates for in-house businesses. We maintain a target discount rate of 40% versus NAV.
3Q23 preview: Impacted by application of IFRS17, Hanwha Solutions’ poor earnings
Hanwha Corp should show consolidated 3Q23 sales of W17.2972tn (+3% y-y) and OP of W439.5bn (-52% y-y) We believe that OP missed consensus on higher earnings volatility at insurance affiliates (due to the application of IFRS17) and ongoing tepid earnings at Hanwha Solutions’ solar module business.
Non-consolidated OP (W44.1bn, -23% y-y) likely continued to be sapped by both heftier commissions/outsourcing costs at the construction division and sluggish solar energy industry conditions for the momentum division. But, the figure estimated should show q-q improvement thanks to both a rise in rechargeable battery-related sales at the momentum division and the effects of rising energy prices on global division earnings.