Focus on GTF RSP, UAM, and Overseas Arms Exports
The author is an analyst of NH Investment & Securities. He can be reached at jinmyung.choi@nhqv.com. -- Ed.
Hanwha Aerospace’s civil division subsidiaries have become new cash-cows, and the defense/aerospace division is showing stable earnings. The firm’s discount to NAV should shrink thanks to its well-balanced business portfolio.
Civil division subsidiaries showing stronger-than-expected earnings
Maintaining a target discount of 20%, we raise our TP on Hanwha Aerospace from W57,000 to W64,000 thanks to the increased value of subsidiaries. In particular, we hike the valuations of subsidiaries such as Hanwha Techwin and Hanwha Precision Machinery, and judge that the EV and profitability of these two companies have become more important.
Civil division subsidiaries: New cash-cows
The firm’s civil division subsidiaries have become new cash-cows. In particular, we note that Hanwha Techwin (CCTV), Hanwha Precision Machinery (chip mounters), and Hanwha Power Systems (complex turbines) have displayed solid earnings for two consecutive quarters. If the growth continues, their EVs are likely to become key variables in determining future share price movements for Hanwha Aerospace, as they take up more than a third of company’s business portfolio.
Focus on GTF RSP, UAM, and overseas arms exports
The firm’s valuations are expected to improve further over the next 10 years as new businesses progress. In addition to the GTF RSP project in cooperation with Pratt & Whitney, the urban air mobility (UAM) business and low-orbit satellite business should emerge as new revenue models. We also expect to see steady arms exports—negotiations are underway to export armored vehicles and light tanks to a number of countries including Australia and India.