Earnings call transcript: Hanwha Aerospace Q3 2025 sees robust growth and stock surge

Hanwha Aerospace reported a substantial increase in its financial performance for the third quarter of 2025, with consolidated sales reaching KRW 6,486.5 trillion, a 147% year-over-year increase. The company’s operating profit rose by 79% to KRW 856.4 billion. Following the announcement, Hanwha Aerospace’s stock saw a notable increase of 6.44%, closing at KRW 1,042,000 per share. The company’s strong performance was driven by growth across its divisions, particularly in land systems and aerospace.

Key Takeaways

• Hanwha Aerospace’s Q3 sales increased by 147% year-over-year.
• Operating profit rose by 79%, reaching KRW 856.4 billion.
• Stock price surged by 6.44% following the earnings release.
• Strong growth in land systems and aerospace divisions.
• Continued expansion in international defense markets.

Company Performance

Hanwha Aerospace demonstrated significant growth in Q3 2025, driven by strong performance across its divisions. The land systems division, in particular, saw a 27% increase in sales, while the aerospace division reported a 26% growth. This performance aligns with a broader recovery in the aerospace market and expanding defense export markets, especially in Europe.

Financial Highlights

• Revenue: KRW 6,486.5 trillion, up 147% year-over-year.
• Operating Profit: KRW 856.4 billion, up 79% year-over-year.
• Pre-tax Profit: KRW 812 billion.
• Net Profit: KRW 712.2 billion.
• Total Assets: KRW 49 trillion.
• Total Liabilities: KRW 34 trillion.
• Net Debt to Equity Ratio: 39%.

Market Reaction

Hanwha Aerospace’s stock experienced a significant uptick of 6.44%, closing at KRW 1,042,000. This movement reflects investor optimism following the company’s robust earnings report. The stock’s performance is notable, given its position within its 52-week range, and indicates strong market confidence in Hanwha Aerospace’s growth trajectory.

Outlook & Guidance

Looking forward, Hanwha Aerospace expects continued solid earnings growth in the second half of 2025. The company is focusing on expanding its export markets and has highlighted potential new orders in Romania and other European regions. The GTF RSP program is expected to reach break-even by 2030, underscoring a long-term growth strategy.

Executive Commentary

• "We expect the GTF RSP program to hit break-even by 2030," stated Hanwha Aerospace Management, highlighting the company’s strategic focus on long-term profitability.
• Han Sang Yoon, Head of IR, mentioned, "We are strengthening our capabilities to compete in the global space market," emphasizing the company’s commitment to innovation and expansion in the aerospace sector.
• "The current administration has been very active in providing strong support," added Hanwha Aerospace Management, acknowledging governmental backing as a key factor in its international defense export strategy.

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production schedules and costs.
• Market Saturation: Increasing competition in the aerospace sector may pressure margins.
• Macroeconomic Pressures: Global economic conditions could affect defense spending.
• Regulatory Changes: Shifts in international trade policies could impact export strategies.
• Technological Advancements: Rapid innovation may require continuous investment in R&D.

Q&A

During the earnings call, analysts inquired about Hanwha Aerospace’s capacity to maintain margins amid increased domestic sales. The company reiterated its focus on expanding production capabilities in Europe and highlighted ongoing export contracts with countries like Poland, Australia, and Egypt. Analysts also expressed interest in the company’s plans for the upcoming Nouri rocket launch, emphasizing its role as a full systems integrator.

Full transcript - Hanwha Techwin Co Ltd (012450) Q3 2025:

Han Sang Yoon, Head of IR, Hana Aerospace: Good morning. I am Han Sang Yoon, the Head of IR at Hana Aerospace. First of all, I’d like to thank everyone for joining the call today. Now I will brief you on Hana Aerospace’s financial performance for the 2025. Please turn to Pages six and seven of the presentation.

The consolidated sales for Q3 was KRW 6,486,500,000,000,000.0, up by 147% year on year, and the operating profit was KRW 856,400,000,000.0 or 79 percent growth year on year. Both sales and operating profit grew, thanks to increased sales in the Land Systems and Aerospace divisions. Further details will be provided in the performance by segment section. Q3 pre tax profit was KRW 812,000,000,000 and net profit was KRW 712,200,000,000.0. Please turn to page eight for financials.

The total assets are 49,000,000,000,972,800,000,000.0 won. The total liabilities are 34,000,000,000,442,900,000,000.0 and the net debt to equity ratio was 39. I share performance by segment. Please turn to Page nine for the land systems. The q three sales was 2,000,000,000,109,800,000,000.0 won, a 27% growth year on year.

The domestic sales were KRW 912,900,000,000.0, a 33 growth year on year, and the export sales was KRW 1,197,000,000,000, a 23% growth year on year. The operating profit was billion, a 30% growth year on year. The overall performance has improved year on year driven by higher domestic sales volumes from the mass major mass production projects such as CBRN reconnaissance vehicle and the wheeled anti aircraft gun system as well as a stronger export performance, including sales recognition from the delivery of the 18 k nine self propelled howitzers and nine Chanel rocket launchers to Poland and other export programs. As mentioned in the previous quarterly earnings call, approximately one third of the SG and A and other expenses that were deferred to the second half of the year have been recognized in the current quarter. The remaining portion is scheduled to be reflected in the fourth quarter.

In the fourth quarter, revenue is expected to be recognized from ongoing domestic projects as well as scheduled deliveries for overseas contracts. Accordingly, we anticipate that solid earnings growth will continue in the second half of the year compared to the first half. Please turn to Page 10 for the Land Systems order backlog. As of the end of Q3, the total order backlog for the Land Systems is approximately 31,000,000,000,000, reflecting approximately 400,000,000,000 won missile supply contract to The Middle East signed in August and the additional k nine self propelled whole reserve supply contract with Norway concluded in September. In addition, approximately 150,000,000,000 won contracts signed in October with the Swedish Defense Materials Administration for the supply of 155 modular charger systems or MCS, as well as the contracts totaling around the 620,000,000,000 won for the mass production of the launchers and components for the Iraq m s a m program or m Sam program are expected to be reflected in the order backlog in the fourth quarter.

Next, please turn to Page 11 for the performance of the Aerospace. The q three sales were 604,000,000,000 won, a 26% growth year on year, and the operating profit was 3,100,000,000.0 won, turning profitable year on year. The turnaround in operating profit was driven by higher defense and LTA volume year on year and the recognition of onetime gain related to the GTF RSP. The GTF RSP business recorded an operating profit of KRW 1,500,000,000.0, driven by a onetime gain of KRW 16,000,000,000 and an increase in an earning engine parts aftermarket or AEM volumes due to the rising maintenance demand. The onetime gain of 16,000,000,000 won reflected the partial reversal of 23,300,000,000.0 won provisions that had been set in the previous quarter to account for the increase in total estimated cost of the GTF RSP program.

Following the Paris Air Show in June, a substantial number of Airbus aircraft equipped with the GTF engines were ordered, leading to an upward revision of the total A and M contract volume for the GTF RSP program, which in turn resulted in the reversal of a portion of the provision. In q three, the number of GTF engine units sold was 250, remaining at a similar level compared to 25 units sold in 250 units sold in the same period last year. Regarding the number of aircraft delivered, Boeing and Airbus delivered a total of 361 units in q three twenty five, up from 277 units in q three twenty three and two 190 units in q three twenty four. Regarding the space business, the fourth launch of the Nouri rocket is scheduled for the early morning of November 27. This will be the first launch since the third mission in May 23, taking place approximately two and a half years later and also marks the first launch following the establishment of the Korean Aerospace Administration.

Notably, the fourth launch will be the first case in which the Nouri launch vehicle is manufactured under the full responsibility of our company as the systems integrator. While the first through third launches were by The Korea’s Aerospace Research Institute or Kari, from the fourth launch onward, our company is responsible for managing the production and quality of components by partner companies as well as conducting both sub assembly and the final assembly of the launch vehicle. We will also actively support launch operations to help ensure mission success. Starting with the fourth launch, the fifth launch is scheduled for next year followed by the sixth launch in 2027. Through these repeated launches, we plan to contribute to improving the reliability of Nuri and in doing so, secure system integration capabilities and operational know how for launch activities.

As illustrated on Pages twenty three and twenty four of the IR presentation, we are strengthening our capabilities to compete in the global space market by building and enhancing a full space business value chain from launch vehicles to satellite manufacturing and satellite data services in collaboration with our subsidiaries, Hanwha Systems and CentricEye. Please turn to page 12 for the performance of Hanwha Systems. Q three revenue was 807,700,000,000.0 won, a 26 increase year on year, and the operating profit was 22,500,000,000.0, a 63% decline year on year. For more detailed performance, outlook and progress of businesses of Hana Systems, please refer to Hana Systems earnings release dated October 31. Please turn to Page 13 for the performance of Hana Ocean.

Q3 sales was KRW 3,023,400,000,000,000.0, and the operating profit was KRW 289,800,000,000.0. For more details on the performance, outlook and the business progress of Hana Ocean, please refer to the earnings call of the company dated October 27. Please turn to Page 14 for the performance of Zechai Gai, which is included in the others. Q three sales were KRW 50,400,000,000.0, up by 15% year on year, and the operating profit was KRW 2,500,000,000.0, recording a threefold increase year on year. Sales and profit improved as the previously awarded project began full scale execution, and the profitability improved greatly supported by higher sales and enhanced operational efficiency, Particularly with five consecutive quarters of operating profit, we expect full year operating result in 2025 to return to profitability.

Lastly, at the Association of the United States Army Defense Exhibition in October, the company signed a joint development agreement with General Atomics Aeronautical Systems Incorporated, a leading global UAV manufacturer for the GE STOL, short takeoff and landing unmanned aerial vehicle. The project is part of our plan to invest over billion in the unmanned aerial vehicle business, including capital secured through the paid in capital increase. Through this initiative, we aim to make a preemptive investment in next generation defense technologies and advance into the global UAV market. As shown on newly added Page 22 of the IR presentation, the company is strengthening its investment in r and d in the drone and anti drone value chain, including unmanned and autonomous weapons system and manned unmanned teaming to prepare for the future battlefield environment, building upon its existing capabilities in ground and aerial weapon system. This concludes the earnings briefing, and I will begin the q and a.

The first question is from Shinhan Investment Security. First of all, thank you for the presentation. I have a questions about the margin rates of the land systems. Directly, I’d like to understand if the margin from the overseas business has went up. I know that you cannot disclose the exact figure, but despite the increased proportion of the domestic sales, it seems that the OPM is maintained.

I know that the margin for the domestic business is limited. Then can I understand and expect that this is because of the higher margin from the overseas business? The answer is, as you have said, the portion of the domestic sales for this quarter has increased by 5%. But the OB margin is different by 1.6% for this quarter. So it is safe to say that it is not that different.

So as you have said, the margin for the domestic sales is not that high or it is limited. But it seems that despite the fact that the portion of domestic sales has increased, the margin fared well. And as we have been seeing from the 2024, the margin from the export business remained quite solid, and that is because of the effect of the repeated production and the ensuing operational excellence. The next question is from Tawil Investment Security. I also have a question about the land systems and about the export.

Looking into the number of units delivered to Poland in terms of K-nine and the Chunmul, the number of units went down versus that of Q2. So can I understand that the strong export performance is driven by the delivery that you have started to Australia and or Egypt? Or is it because of the increase in ammunition on a Q on Q basis? I’d like to understand the background of the increase in the export. The answer is, as you have said, there is some new revenue coming from Egypt and Australia.

And also in terms of the number of units delivered to Poland, the number of K-nine units remained the same. Meanwhile, the number of Chonmo units went down slightly. And what has taken its space is the guided weapon systems and also the munitions and other auxiliary item. This has been discussed in the previous quarter’s earnings call that in the second quarter, the revenue from the auxiliary items including munition was not as significant, but it will go up in the third quarter. And the next question is from Shinhan Investment Security.

I have a question about the GTF RSP. It turned around this quarter, and you have explained that this is because of the reversal of the provisions that you have set aside, and it is the onetime event. So I’d like to understand the trend for the future. Considering the number of deliveries to the airliners, do you expect this trend can be maintained in the future? The answer is, if I can find my answer to the GTF RSP and its future prospect, as was discussed earlier for the particular quarters, we will set aside some provisions, and that will be reversed because of the positive development in the industry, and that might lead to the small amount of profit.

But for the duration of the year twenty twenty five and twenty six, we expect that the amount of the loss will be the highest until the year 2030, which we expect to hit the BEP, and then afterwards, it will turn profitable. The next question is from Tawul Investment Security. I have a question about the SG and A. You have mentioned that the deferred SG and A expenses, about a third of it has been reflected in this quarter. And as far as I remember, you did not share the exact figure.

So can you please share more details? The answer is the deferred SG and A, a third of it has been reflected in this quarter and the remainder will be reflected in the fourth quarter. Despite I cannot disclose despite the fact that I cannot disclose the detailed figure, the total amount is not that significant. It did not impact much on the Q3 performance. As for the Q4 performance, the Land Systems, the performance will remain quite solid, but there will be some one off expenses such as the performance bonus.

Excluding those onetime expenses, the core earnings for the fourth quarter will remain solid despite the fact that the two thirds of the SG and A will be reflected. The next question is from Tower Investment Security. So you have said in the previous quarter’s earnings call that you expect the Land Systems will continue to enjoy the 20% growth this year and the next year, and you will share more details in this quarter’s earnings call. So can I expect that this year’s and the next year’s guidance will remain the same? The answer is we expect the direction will be remain will remain the same.

But for the ’26 growth rate, it will based upon the revenue for the fourth quarter. Because if the baseline goes up, then they will affect the growth rate for the ensuing year. So we will have to revisit that when we have more solid idea as to what the sales for the next quarter will be. And I believe that it is little too early to share any further details because we are still preparing the business plan for the year ’26. So I believe that we can share more details in early February when we have the next quarter’s earnings call with the ’26 business plan.

The next question is from I’m Securities. I believe that the deliveries for the first contract for the K-nine to Poland has been almost completed. So I have a question about the second phase or the EC2. Will the production continue on with the first phase of the contract? If there is any interval in between, how long will be the delay?

And as for the Jeonmu, of course, that there are some volumes remaining for the first phase of the contract. When do you expect the production and the delivery for the second part or the second phase of the Cheonmoo contract will begin? The answer is for the k nine EC two business, the consultation is currently underway. So when it’s done, of course, that it is a matter of the capacity or the capability of our company in terms of the production and the delivery, there are also circumstances that we need to take into consideration from the recipient’s side. Though it is too early to say anything definite from our perspective, of course, that the continuation of this project will be the best.

But we can share more details when we have more result from the EC2 consultations currently underway. The next question is from Xinhan Investment Security. I’d like to understand the progress of the joint venture plant in Overseas Sainte. I know that it is a long term initiative, so it may not be tangible, but there are some media reports about this project in Poland and Romania. So can you share any timeline that you have as of now?

The answer is, I believe that you might have this question or ask for the updates on every quarter. But as you have said that this is a long term project. So if there is anything more visible or tangible, then we will share the updates with you. So when it comes to the Romanian project, the site has been secured and the groundbreaking will happen by the end of this year. And the site will be used for the production of the KE nine whose contract has been already awarded to the company.

The site will also be utilized for the armored vehicle contract, which the result of which will be finalized in the first half of next year. The Poland site that will be used for the oh, the JV has been already signed for the Chunmu and Thomas munition. And in terms of the securing the site and the constructions, we are collaborating and consulting with the local partners. So if there is anything that’s tangible, then we’ll communicate to the market. The next question is from Mira Sze Securities.

I have a question about the export sales of the land systems. The share of the sales that goes out to Poland has increased, but it seems that in terms of the profitability, there are not significant differences. So can I understand this is because of the margin for the export to other destination is also very solid? It is in the same range as your export to Poland. The answer is out of the total export revenue, the Polish volume accounts for the significant portion, and this trend will continue in the year ’26 and ’27.

In terms of the exports to other destinations, in case of this quarter, there were sales of the auxiliary items including munitions, and the profitability is not that different from our export to Poland. So because of that factor, so there was a slight increase in the portion of the domestic sales by 5%, but still the operating margin remained the same as the similar range as the previous quarter. The next question is from Korea Investment Securities. So I’d like to understand if there has been any change in the guidance in terms of the number of deliveries of K-nine and Chanmu to Poland for the year 2025 since the second quarter? The answer is in terms of the number of deliveries.

So cumulatively until the third quarter of this year, we have delivered 56 units of K-nine and 60 units of Cheonmoon. And we have shared the guidance for the whole ear delivery for this year. For canine, it was 70 units or more. In case of Cheonmoon, it was 80 units or more. So the differential between the this year’s guidance and the cumulative delivery for the third quarter is 14 plus units for k nine and twenty plus units for Jeonmu, and it will be delivered in the fourth quarter.

And as there is only one quarter left, and do not believe that there is any need to update the guidance. The next question is from I’m Securities. I have a question about the schedule for the Australian Red Bag production and the delivery and Egypt K-nine production and delivery. The answer is, let me start with Australian cases. In case of bread bag that we have started to recognize the development revenue and the delivery will begin from day twenty seventh.

Though it is not part of your question, if I may share that we have started the delivery from the fourth quarter of this year for the k nine and k 10, which is called in The Australia as AS nine and AS 10, and we expect the sales recognition will continue in year ’26 and ’27. And as for the Egypt k nine, the module sales have started to be reflected in parts, and the full delivery will start from ’26. Next question is from NH Securities. I’d like to understand the breakdown between the launchers and ammunition for the first phase contract of Changmu to Poland. What is the share and how much of it has been delivered?

The answer is then this is the question that it is difficult for us to answer. So if only we could share the clear breakdown between the launchers and ammunition, but we cannot because of the arrangement that we have entered into with our customer. But what I can say is that the proportion of the munition sales is not insignificant, and it is unlike the 155 shell for the k nine. It is a guided munition, so it has a higher value. We expect the revenue of the will continue to incur in the ’26 in the year ’26 and ’27, and it will account for quite significant portion of Changmu sales.

The next question is from Shinhan Investment Security. I have a similar questions about the munitions, the capacity of the plant. I believe that you are planning to open your plant both in Korea and overseas. So I’d like to understand the timing and the expected capacity of this relations plant. The answer is for the domestic plant, as we have disclosed earlier this year, that we have a plan to increase the capacity of the plant for the MCS, the modular charger system by twofold.

And I believe that it is from the ’27 that this plant will be operational and the sales from this operation is reflected. And most of this volume will be for export who has the better margin. Considering this higher margin profile, the MCS the revenue mix will contribute to the higher profitability. And as for the European countries and The United States, the capacity for the ammunitions have expanded and so does the demand for the propellant has increased. So like I said earlier, the expansion capacity expansion in the local plant will be targeting the international use or the exports.

So we will also consider the potential the local production. It is at a very early phase that we are looking into the potential site in The United States and also in European countries. And when we have more tangible progress, then we will definitely share with the market. The next question is from Taiwa Securities. I have a question about the new order pipeline.

The presidential envoy visited Europe last week and so did your management. So it seems that the armored vehicle project for Romania are pushed to next year. So I’d like to understand, has there been any updates in your new order pipeline? The answer is for the Romanian project, we have communicated earlier that it might start within this year, but it is more likely or the very likely that it will start in earnest from the ’26. In terms of the new order pipeline, we have been focusing on various region with the various product, especially with such products that has the competitiveness as the k nine and Changmu and Redbag and the anti aircraft systems and n MCS.

We have secured new orders in the third quarter, and this will continue in the year ’26. In the process, the support from the government, it plays a very important role and as was covered by the media report. And this current administration has been very active in providing a strong support. Considering the fact that what has been exposed, we will make sure that it might lead to the new order in the upcoming years so that we can continue this strong pace of growth after ’28. And when we have more visibility into any future orders, then we will share with the market.

And that is the end of the q and a for the Hana Aerospace third quarter twenty five earnings call. Thank you.

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