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Key Summary
* Hanwha Aerospace has secured a record-high consolidated order backlog of approximately KRW 118 trillion, including KRW 39.7 trillion from its land defense division and consolidated subsidiary Hanwha Ocean.
* The consensus for Q2 2026 operating profit stands at around KRW 1 trillion, aiming for the KRW 1 trillion quarterly profit era. However, concerns remain that it might slightly miss forecasts due to one-off costs and short-term shifts in export mix.
* Amid a "second-half loaded" (low in the first half, high in the second half) performance trend where shipments to Poland and Australia are concentrated in the latter half of the year, the potential entry into the shortlist for the U.S. Self-Propelled Howitzer Modernization (SPhyM) project is viewed as a powerful momentum catalyst.
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Market Update
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As of July 12, 2026, the Korean stock market closed with the KOSPI at 7,475.94 and the KOSDAQ at 837.43, while the USD/KRW exchange rate closed at 1,503.40 won.
The U.S. Nasdaq composite is hovering around 26,281.61.
With the USD/KRW exchange rate remaining in an ultra-high zone above 1,500 won, market demand is concentrating on large-cap stocks with a high proportion of land defense exports.
However, amid concerns over a domestic and global economic slowdown, the KOSPI is currently passing through the "Extreme Fear (16.2)" stage, according to Daily Stock's proprietary Fear & Greed Index.
This shows that investment sentiment remains frozen compared to the "Extreme Fear (19.8)" registered a week ago, proving that market caution has reached its peak compared to the "Neutral (53.7)" of one month ago and "Neutral (53.1)" three months ago.
Conversely, the Nasdaq Fear & Greed Index currently stands at "Neutral (49.5)," showing a calmer tone after transitioning through "Fear (32.4)" a week ago, "Fear (26.9)" a month ago, and "Greed (77)" three months ago.
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Financial Analysis
Hanwha Aerospace achieved unrivaled growth in 2025, recording consolidated revenue of KRW 26.7029 trillion and operating profit of KRW 3.0893 trillion.
In Q1 2026, it maintained robust profitability, recording consolidated revenue of KRW 5.7510 trillion and operating profit of KRW 638.9 billion.
| Category | FY 2025 (Audited) | Q1 2026 (Audited) | Q2 2026 (Forecast) | Order Backlog (As of Q1-End, by Division) |
|---|---|---|---|---|
| **Consolidated Revenue** | KRW 26.7029T | KRW 5.7510T | KRW 8.2911T | - |
| **Consolidated Operating Profit** | KRW 3.0893T | KRW 638.9B | KRW 957.9B ~ 1.0170T | - |
| **Land Defense Backlog** | - | - | - | KRW 39.7000T |
| **Consolidated Backlog** | - | - | - | KRW 118.1274T |
(Data source: FnGuide and respective quarterly reports)
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Valuation
Hanwha Aerospace's stock closed at KRW 967,000 (as of the close on 2026-07-10).
Reflecting short-term stock price volatility and a decline in the valuation of subsidiary stakes, some brokerages are making minor adjustments to their target prices.
KB Securities conservatively adjusted its target price from KRW 1.75 million to KRW 1.40 million but maintained its "BUY" rating.
Daishin Securities also adjusted its target price down from KRW 1.75 million to KRW 1.72 million to reflect revised valuations of consolidated subsidiaries, while maintaining that mid-to-long-term growth driven by active localization remains intact.
Currently, the market consensus target price is established at approximately KRW 1,764,211, securing significant long-term upside compared to the current stock price.
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Analyst and Institutional Perspective
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Domestic experts analyze that Hanwha Aerospace's profit curve this year will show a classic "second-half loaded" shape.
As major deliveries of the Polish Chunmoo and K9 self-propelled howitzers are concentrated in the second half of the year, the export share in the third quarter is expected to rise to its annual peak of 75.1%.
Particularly in the second half, the announcement of the shortlist for the U.S. Self-Propelled Howitzer Modernization (SPhyM) project is scheduled, which could open up the possibility of entering the U.S. market for the first time in history.
Institutions maintain a favorable outlook, noting that the localization strategy which secured a strong European foothold, such as the additional Chunmoo contract with Norway (KRW 1.3 trillion), will serve as a reliable growth driver for mid-to-long-term performance.
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Risk Factors
First, changes in the cost structure related to Risk and Revenue Sharing Programs (RSP) may temporarily limit short-term profitability in the aerospace segment.
Second, while the recent ultra-high exchange rate in the 1,500 won range is favorable for defense export companies, any sudden fluctuation in exchange rates could trigger foreign exchange valuation volatility, leading to stock price fluctuations.
Third, as seen in the disappointment of losing the massive Romanian Infantry Fighting Vehicle (IFV) order to its German rival Rheinmetall, there are concerns over margin erosion due to intensifying bidding competition in the global market.
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Investment Outlook
In the short term, a scenario of temporary stock price consolidation is possible due to concerns that Q2 operating profit might slightly miss expectations.
However, the record backlog of nearly KRW 118 trillion and the visibility of large-scale contract pipelines demonstrate highly resilient performance defense compared to other large-cap stocks.
Therefore, an approach focused on long-term valuation re-rating, while monitoring the second-half loaded export recognition schedule and U.S. market entry momentum, may be a reasonable strategy.
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Investor Checklist Q&A
Q1. What are the specific reasons why Q2 earnings are expected to miss market consensus?
A1. It is largely due to a temporary lull in the export recognition of the land defense division during the first half, coupled with rising RSP provision costs in the aerospace division.
Q2. What is the breakdown of the current order backlog between land defense and consolidated operations?
A2. As of the end of Q1 2026, the standalone backlog for land defense is KRW 39.7 trillion, and the total consolidated backlog including Hanwha Ocean is KRW 118.1274 trillion.
Q3. What are the key export items that could accelerate the second-half earnings rebound?
A3. Deliveries of the Australian K9 self-propelled howitzers, Polish Chunmoo multiple launch rocket systems, and additional K9 export contract volumes are heavily scheduled for the second half of the year.
Q4. Why did some brokerage firms recently lower their target prices?
A4. It is a temporary rebalancing reflecting the decline in subsidiary valuations and temporary adjustments to near-term operating margins. Their investment rating remains "BUY."
Q5. With the exchange rate hovering in the 1,500 won range, how does this ultra-high exchange rate affect performance?
A5. The currency effect on defense revenue is favorable for maximizing profit margins, but sudden macro shifts could present risks due to short-term foreign exchange loss volatility.
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