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Today, the domestic stock market made meaningful moves as buying pressure entered mainly around large-cap blue-chip stocks that demonstrated a solid performance foundation despite high exchange rate volatility.
[Image: /stdaily/uploads/202606/gen_6a2baf1c0ed3c7.76512246.png]
Executive Summary
Hanwha Aerospace (012450) is emerging as an unrivaled supply chain hub in the global security market, backed by strong export performance in the land defense sector.
Its order backlog in the land defense sector alone reached approximately 39.7 trillion won as of the first quarter, securing a solid workload that practically puts it on the verge of surpassing 40 trillion won.
This is coupled with expectations for a re-evaluation of the aerospace sector overall, coinciding with the news of SpaceX's largest-ever NASDAQ listing.
Although there are short-term financial concerns, such as a sharp increase in short-term borrowings and an expanding operating cash flow deficit, a rapid turnaround scenario is emerging as the full-scale recognition of delivery volumes begins in the second half of the year.
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Market Overview
On June 12, 2026, the KOSPI index closed at 8,123.62, up from the previous trading day.
The KRW/USD exchange rate settled in the 1,520.70 won range, maintaining a favorable high-exchange-rate environment for export companies.
Hanwha Aerospace's closing price on this day finished strong at 1,046,000 won, up 3.16% from the previous trading day.
This was driven by positive news regarding Hanwha Ocean's next-generation destroyer (KDDX) and news of expanding geopolitical demand in the Middle East and Europe, which strongly stimulated investor sentiment.
Currently, the KOSPI is in the 'Neutral (44.6)' phase on the Daily Stock Fear & Greed Index.
This follows Neutral (49.8) one week ago, Greed (64.7) one month ago, and Fear (28.2) three months ago, showing a recent transition toward performance-oriented supply and demand led by large-cap stocks such as semiconductors and automobiles.
On the other hand, the NASDAQ Fear & Greed Index currently remains in the 'Fear (29.7)' zone.
Compared to Neutral (41.8) one week ago and Greed (65.7) one month ago, it is facing significant short-term supply and demand pressure due to caution over macro monetary policies.
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Financial Analysis
Hanwha Aerospace achieved consolidated revenue of 5.751 trillion won and an operating profit of 638.9 billion won in the first quarter of 2026.
This demonstrated excellent profitability, increasing by 5% and 21% year-on-year, respectively. Net profit surged 188% to 526.3 billion won, reflecting financial gains such as foreign currency translation gains.
| Key Financial Items (Q1 2026 Consolidated) | Amount / Ratio | Year-on-Year (YoY) / Quarter-on-Quarter |
|---|---|---|
| **Consolidated Revenue** | 5.751 trillion KRW | +5.0% |
| **Consolidated Operating Profit** | 638.9 billion KRW | +21.0% |
| **Net Profit** | 526.3 billion KRW | +188.0% |
| **Debt-to-Equity Ratio** | 224.88% | 221.38% (Slightly up QoQ) |
| **Operating Cash Flow** | -1.7143 trillion KRW | Deficit expanded |
[Image: /stdaily/uploads/202606/gen_6a2baf2a6855d9.94694956.png]
Despite the significant improvement in profitability indicators, operating cash flow recorded a deficit of -1.7143 trillion won due to securing materials for large-scale projects in advance.
With short-term borrowings increasing, the debt-to-equity ratio stands at 224.88%.
However, if sequential cash recovery of order payments from Poland and Australia takes place in the future, financial stability is expected to get back on track.
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Valuation
Based on the current stock price of 1,046,000 won, Hanwha Aerospace's market capitalization sits at approximately 53.9353 trillion won.
Moving past its historical long-term undervaluation where multiple was around 12x, and accommodating the full-scale global supply chain re-rating, its 12-month forward PER is currently hovering around the 32x level.
In particular, the Sum-of-the-Parts (SOTP) valuation, which adds the overwhelming value of land defense and the aerospace value as Korea's representative space launch vehicle enterprise, is highly attractive.
With global peers such as Germany's Rheinmetall receiving high multiples, the global mass-production competitiveness of domestic defense weapon systems serves as a weapon to justify its valuation.
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Analyst & Institutional Consensus
According to securities market estimates from sources like FnGuide, Hanwha Aerospace's Q2 2026 revenue consensus reaches 7.1375 trillion won, and operating profit is expected to reach 1.0105 trillion won.
This represents a historic milestone, breaking into the era of 1 trillion won in quarterly operating profit for the first time.
Although it experienced a temporary volume gap in the first half of the year due to overseas delivery delays, a large volume of deliveries, including the Chunmoo and K9 to Poland and self-propelled howitzers to Australia, is expected to be reflected in the second half.
In foreign investor flow analysis, attention is also paid to order momentum arising from the Spain K9 project expected to materialize within the year and the selection of the preferred bidder in the United States.
Improved margin rates coupled with the rising KRW/USD exchange rate are interpreted as a positive link stimulating long-term buying interest.
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Risk Factors
Internally, unpredictable sudden cost increases such as accidents at the Daejeon plant and a corresponding temporary drop in utilization rates can be cited.
Although the company is doubling its safety investment annually in unmanned remote automated process facilities to overcome this, the risk of transitional margin losses must be monitored.
External macro risks include the discount pressure on large-cap tech and defense growth stocks when the Bank of Korea maintains a prolonged monetary tightening tone.
The possibility of foreign currency translation profit damage that would occur if the KRW/USD exchange rate falls rapidly cannot be ruled out either.
Additionally, the potential for liquidity concentration due to the SpaceX listing to cause volatility in domestic aerospace and major Exchange Traded Funds (ETFs) is an area that requires monitoring.
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Investment Outlook
Hanwha Aerospace has secured a solid backlog of 40 trillion won, providing a stable workload that avoids concerns over economic slowdown risks.
The visible performance achievement of 1 trillion won in Q2 operating profit will be the first milestone demonstrating its long-term earnings fundamentals.
However, the burden of the deteriorating debt-to-equity ratio and the operating cash flow deficit at this point is a condition that must be examined carefully until cash inflows from achieving actual milestones occur.
Therefore, a strategy of checking support levels and dividing portfolio allocations based on the progress of large-scale global contracts and order recovery scenarios could be advantageous.
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Investor Checklist Q&A
Q1. What is the current order backlog level and major weapon systems in the land defense sector?
A1. The cumulative order backlog for land defense as of the first quarter is around 39.7 trillion won. The main products are the K9 self-propelled howitzer, a global bestseller, and the Chunmoo multiple launch rocket system, which continues to receive love calls from Europe.
Q2. What specific overseas order momentums are scheduled for the second half of the year?
A2. The signing of the main contract for the Spain K9 self-propelled howitzer project, the announcement of the preferred bidder selection for the US self-propelled howitzer project, and progress in export discussions with Saudi Arabia are lined up within the year.
Q3. Why is the operating cash flow deficit so large in the first quarter?
A3. This is because front-loaded investments in working capital, such as securing parts and raw materials, were heavily consumed during the process of conducting long-term, large-scale export projects. Once full-scale deliveries begin in the second half, the cash conversion cycle is expected to normalize.
Q4. What impact did the SpaceX listing and the UAE transport aircraft parts delivery news have on the stock price on that day?
A4. Around the time of the US SpaceX listing on June 12, supply and demand momentum as Korea's leading space stock continued, and the news of urgent component transport via UAE aircraft boosted defense margin expectations, driving a 3.16% increase in the stock price on that day.
Q5. How attractive is the valuation compared to the peer group?
A5. Although the PER has reached the 32x level due to the stock price rise, considering the upward valuation trend of global peers such as Rheinmetall and the high visibility of achieving 1 trillion won in quarterly operating profit in Q2, it still holds the potential for re-rating in terms of mid-to-long-term growth.
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