Daishin Securities announced on July 27 that some revenue from Hyundai Rotem's second contract for K2 tanks in Poland is expected to be deferred to 2028, prompting a reduction in the target price to 240,000 won. However, the investment rating remains a 'Buy.'
Choi Jeong-hwan, a researcher at Daishin Securities, stated, "The expected orders have not been canceled, but rather delayed," adding that "Hyundai Rotem's investment points remain valid."
For the second quarter, Hyundai Rotem reported consolidated sales of 1.606 trillion won, a 13.3% increase from the same period last year, while operating profit fell 9.7% to 232.4 billion won. Although sales fell short of market estimates, operating profit met expectations, with an operating margin of 14.4%.
Choi projected that the production and revenue recognition of 64 K2PL tanks for Poland would occur between 2027 and 2028, leading to a portion of the previously concentrated 2027 results being deferred to 2028. Consequently, he adjusted the defense solutions performance estimates for 2027 and lowered the target price.
However, he noted that if the Peru tank project secures a main contract, it could significantly fill the gap left by the deferred Polish orders. Additionally, while the Iraq tank project has been delayed due to the situation in the Middle East, business activities are expected to resume in the second half of the year, and the Romanian project is anticipated to ramp up starting in 2027.
The rail division was also viewed positively. Choi forecasted that production for the profitable Morocco project would begin in earnest in 2027, leading to rail solutions revenue of 3.3 trillion won, a 34.2% increase from the previous year, with an improvement in operating margin from 0.6% to 1.7%.
* This article has been translated by AI.
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