Hanwha Aerospace propels group‘s market cap surge

[Graphics by Song Ji-yoon and Chang Iou-chung]

South Korea’s Hanwha Group saw a surge in its market capitalization by nearly 2 trillion won ($1.5 billion) in 2024 to date, propelled by the recent increase of defense industry stocks and the emergence of low price-to-book ratio (PBR) stock trends.

According to the Korea Exchange on Sunday, Hanwha Group’s market capitalization was 32.25 trillion won as of March 8th, 2024, or an increase of 1.96 trillion won from the group‘s market cap at the end of 2023, which was 30.29 trillion won. With this recent surge, Hanwha Group was ninth in market capitalization as of February 28th, 2024, after placing 10th just the day before. The figure does not include preferred stocks.

The surge in market capitalization was primarily driven by the rise in Hanwha Aerospace Co., which has displayed robust performance to hit a new 52-week high recently. The company’s year-to-date increase stood at 60.64 percent as of March 8th.

During the same period, Hanwha Aerospace‘s market capitalization also surged by 3.82 trillion won to 10.13 trillion won from 6.3 trillion won.

Escalating geopolitical tensions and heightened security risks gave Hanwha Aerospace’s stocks a boost.

Another contributing factor was the amendment to the law governing the Export-Import Bank of Korea. The amendment bill, which passed in the National Assembly at the end of February 2024, raised the bank’s legal capital limit, which in turn is expected to benefit defense exporters, including Hanwha Aerospace, who have faced challenges due to this limited capacity. With the amendment, the uncertainty surrounding Hanwha Aerospace’s second phase of the arms export to Poland is believed to have decreased.

Hanwha Aerospace‘s performance was also notably strong, with sales of 3.44 trillion won and operating profits of 289.5 billion won in the fourth quarter of 2023, representing a 32.6 percent and 79.6 percent year-on-year increase respectively.

Analysts predict further upward potential for the company’s stock prices even after their recent sharp rise.

“There is considerable momentum for Hanwha Aerospace stocks to rise further, given the company’s K9 self-propelled artillery contract with Romania and the delivery of Cheongung-II missile defense systems to Saudi Arabia,” an analyst saisd.

Hanwha Group’s surge has also been led by the bullish trend among low PBR stocks, including financial and holding company stocks. Hanwha Life Insurance Co., Hanwha Corp., Hanwha Investment & Securities Co., and Hanwha General Insurance Co. have all seen increases of over 10 percent in 2024, with rises of 11.31 percent, 15.15 percent, 30.32 percent, and 18.77 percent respectively.

Meanwhile, Korea’s leading platform giant Naver‘s group market capitalization slipped to tenth place as of March 8th, 2024, from its previous rank of seventh, with a decrease of 5.68 trillion won in market capitalization. Naver is not benefiting from the trend of low PBR stock growth and its advertising revenue, which accounts for most of its performance, is also stagnant as the domestic economic recovery remains below expectations.