Hanwha Aerospace stocks thrive on defense contracts amid growing geopolitical risks

Hanwha Group's booth at the Association of the United States Army 2024 Annual Meeting and Exposition in Washington, D.C., Oct. 15 / Courtesy of Hanwha Aerospace

The stock price of Hanwha Aerospace is skyrocketing. Its successes in major defense export projects have attracted foreign investments, while optimistic performance outlooks, driven by geopolitical risks, have contributed to the recent surge.

According to the Korea Exchange, Monday, Hanwha Aerospace's stock closed at 381,500 won ($277), down 1.55 percent from the previous trading day as investors took profits.

However, the stock has surged by 30 percent this month alone and is up 65 percent from six months ago. This strong performance prompted brokerage firms to raise their target prices repeatedly, with the current market consensus now sitting at 401,200 won.

The brokerage industry sees a steady stream of orders for major defense projects as a key driver behind the rally.

Hanwha Aerospace has been instrumental in the production and export of key domestic weapon systems, including the K9 self-propelled howitzer. It has garnered significant international attention, with Poland receiving 212 of the weapons in the first shipment and 152 in the second. Additionally, the Redback armored vehicle has been in negotiations with Australia and other global defense companies.

Furthermore, the Russia-Ukraine war has intensified geopolitical risks in Europe, driving up demand for ammunition.

"Europe currently operates at just a quarter of Russia's ammunition production capacity, resulting in ongoing shortages. Hanwha Aerospace is poised to expand its presence in the market, backed by its track record of securing propellant orders from a U.K. defense company. With planned production expansion, the company is expected to integrate into Europe’s ammunition value chain," Meritz Securities analyst Lee Ji-ho said.

Lee also projected Hanwha Aerospace’s third-quarter revenue to reach 2.56 trillion won, reflecting a 29 percent increase year-on-year. Operating profit is expected to surge 205.1 percent to 350 billion won, further reinforcing the company’s strong market outlook.