Continuing to Beef up New Business Portfolio

The author is an analyst of NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com. -- Ed. 

 

In addition to its stable in-house defense business, Hanwha Corp is strengthening its growth potential by expanding business portfolios, including its renewable energy (solar power and hydrogen) and aerospace ventures. A planned capacity expansion at Hanwha Corp’s nitric acid production facilities should spur in-house business growth. Its shares are currently trading at a 54% discount to NAV.

Earnings momentum sustaining; continuing to beef up new business portfolio

Hanwha Corp’s earnings momentum is continuing to strengthen, led by solid contributions from the defense business (in-house defense business and Hanwha Aerospace) and sound earnings at its financial affiliates amid a robust stock market. We see consolidated 2021E OP of W2,548bn, a 61% y-y jump.

Hanwha Corp continues in its efforts to strengthen its new business portfolio. With Hanwha Solutions (after a paid-in capital increase) having acquired both the remaining stakes in Hanwha General Chemical and 100% of RES Méditerranée SAS, and Hanwha Aerospace beefing up its aerospace business by acquiring Satrec Initiative, Hanwha Corp itself is trying to expand its business opportunities via expansion of its nitric acid facility, growth at its clean development mechanism (CDM) business, and participation (alongside its affiliates) in an aerospace/hydrogen venture. The planned merger of H Solution (100% owned by the controlling shareholders) and Hanwha Energy is understood to mark the beginning of preparation for a succession of management rights.

 2Q21 review: Hanwha Aerospace spearheads earnings momentum

Hanwha Corp posted consolidated 2Q21 sales of W12.68tn (+15% y-y) and OP of W769bn (+53% y-y), with OP beating the market projection.

Non-consolidated OP (W88.6bn, +52% y-y) improved significantly on increased overseas sales at the in-house defense/machinery business and petroleum product margin improvement at the global division. On a consolidated basis, Hanwha Aerospace’s brisk OP momentum (+W132.6bn, +89% y-y) more than offset negatives such as sluggish earnings at Hanwha Hotels & Resorts due to Covid-19 (operating losses of W28.8bn, RR y-y), decreased overseas sales at Hanwha Engineering & Construction (W54.5bn, -39% y-y), and higher operating losses at Hanwha Solutions’ solar arm (W221.1bn, +72% y-y)

 

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