SK Securities has cut its target for Hyundai Rotem by 42%, citing weaker-than-expected third-quarter results, margin pressure and uncertainty over the timing of overseas defence orders.
SK Securities has sharply cut its target price for Hyundai Rotem, saying the market has become more cautious on the South Korean defence contractor after third-quarter earnings fell short of expectations and questions grew over overseas orders and next year’s profit mix. The broker reduced its valuation target to 180,000 won from 310,000 won, while keeping a buy recommendation, according to the report cited by EDaily.
Hyundai Rotem said sales for the third quarter came in at 1.62 trillion won, little changed from a year earlier, while operating profit slipped 11% to 247.1 billion won, below the market consensus cited by EDaily. The defence division still delivered a solid margin of 28.1%, helped by deliveries of K2 tanks and related military supplies to Poland, even as the share of exports declined. The Korea Times also reported that net profit fell 10.3% from a year earlier.
The main concern for analysts is the timing of Polish deliveries and the effect that could have on next year’s earnings. SK Securities said Hyundai Rotem plans to supply 58 of the 116 EC2 GF tanks in the second half of this year and the remaining 58 next year, while production of 64 EC2 PL tanks in Poland has been brought forward to the second half of 2027 from a previous 2028 schedule. That shift should ease fears of a revenue gap, but analysts still expect margin pressure in 2026 as domestic production mix changes and the won moves the other way.
The broker also argued that Hyundai Rotem’s longer-term case still depends on converting its export pipeline into signed contracts. Peru is seen as the most advanced opportunity, with a possible deal early next year after parliamentary review, while Romania could follow in the first half of 2027 once its new government settles in. Iraq, by contrast, remains clouded by political and fiscal uncertainty as well as Middle East tensions. Other brokers have turned more cautious too: Daishin Securities, KB Securities, DB Securities and Daol Investment & Securities have all cut targets this year while keeping buy ratings, according to the summaries provided. SK Securities said a stronger rerating will only be possible once overseas orders become more visible and stable export volumes are secured.
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