Hanwha Aerospace

Hanwha Aerospace runs ground defense, centered on the K9 self-propelled howitzer, the Chunmoo multiple rocket launcher and the Redback fighting vehicle, and an aerospace division covering aero engines and space, while consolidating Hanwha Ocean and Hanwha Systems as subsidiaries.

The sharp top-line expansion from 2025 reflected both growth in ground defense and aerospace and the consolidation of Hanwha Ocean. In 2Q26, strong subsidiary results, including Hanwha Ocean (revenue of 5.4 trillion won, up 45.5%) and Hanwha Systems (1.1 trillion won, up 65.2%), contributed heavily to group figures.

Looking only at the core ground-defense division, second-quarter revenue was 2.1075 trillion won with operating profit of 533.0 billion won.

Within ground defense, domestic sales were driven by revenue recognition on programs such as Chunho and Chungeom, while exports were led by the Polish Chunmoo program, K9 components, Egyptian K9 and Middle East and Australian projects.

Customers split between Korean government agencies such as the Defense Acquisition Program Administration and overseas defense ministries in Poland, Finland, Norway, Estonia, Romania, Egypt, Australia and India.

The K9 has been exported to nine countries since Turkiye in 2001, including Poland, India, Finland and Norway, making it the global share leader in tracked self-propelled howitzers, and with Spain added in August 2026 the operator count rises to eleven.

The competitive setting is now direct rivalry with global primes, as shown by its sole selection in the US MTC program over American Rheinmetall, General Dynamics, BAE Systems and KNDS and Leonardo DRS.

In aerospace, the GTF commercial engine joint development program with Pratt and Whitney, under way since 2015, is the base from which it is trying to move from engine components toward complete engines.

The annual path ran from 2022 revenue of 6.5396 trillion won and operating profit of 377.2 billion won (5.8% margin) to 9.359 trillion won and 691.1 billion won (7.4%) in 2023, 11.240 trillion won and 1.7319 trillion won (15.4%) in 2024, and 26.703 trillion won and 3.0893 trillion won (11.6%) in 2025.

Even as 2025 revenue more than doubled, the operating margin fell from the prior year, consistent with businesses carrying different margin profiles entering the consolidation scope.

Profit attribution also matters: of 2.202 trillion won of 2025 net profit, 1.405 trillion won belonged to controlling shareholders, leaving a large share to minority interests.

In 2024, controlling-shareholder net profit of 2.2989 trillion won exceeded operating profit of 1.7319 trillion won, implying a sizeable non-operating contribution and making year-to-year net profit comparisons difficult.

On a quarterly basis, revenue rose from 6.311 trillion won in 2Q25 (operating profit 864.5 billion won) to 6.4865 trillion won in 3Q25 (856.4 billion won) and 8.4212 trillion won in 4Q25, though the fourth-quarter margin slipped to 9.6% on operating profit of 807.6 billion won.

First-quarter 2026 slowed to 5.751 trillion won of revenue and 638.9 billion won of operating profit, and fell well short of the then-consensus operating profit of 774.3 billion won.

Second-quarter 2026 reversed that with 9.2929 trillion won of revenue, 1.3655 trillion won of operating profit and a 14.7% margin, and came in far above the one-trillion-won consensus.

On the balance sheet, the debt-to-equity ratio fell from 317.2% in 2023 to 281.3% in 2024 and 221.4% in 2025, while operating cash flow expanded to 4.0498 trillion won in 2025 from 1.3930 trillion won a year earlier.

Still, with minority interests accounting for 7.1033 trillion won of 16.7882 trillion won in total equity, consolidated and controlling-shareholder metrics should be read separately.

Since the war in Ukraine, as countries rebuild artillery capability, procurement criteria have broadened from firepower alone to mobility, automation and local production capability.

For the Korean defense sector as a whole, the cycle is shifting from order intake to delivery and revenue recognition; analysts read the record 2Q26 numbers as large contracts already won in Poland and the Middle East converting into revenue through production and delivery rather than as new bookings.

Backlogs among the major players stand at roughly 38.3 trillion won for Hanwha Aerospace ground defense, 30.4046 trillion won for Hyundai Rotem and 24.57 trillion won for LIG Defense and Aerospace, about 93.27 trillion won for those three alone, with the industry putting the four-company total including KAI at around 100 trillion won.

Yet export growth has not translated into margin gains for every company, with results differentiated by product mix, costs, exchange rates and delivery timing.

In Europe, procurement practice increasingly emphasises participation by domestic defense firms and local manufacturing, which pressures a pure finished-goods export model.

In the United States, the backdrop is replacement of M777 towed howitzers and a shift in artillery modernisation strategy, after repeated halts to home-grown programs such as Crusader, NLOS-C and ERCA opened the door to proven foreign systems.

Wheeled and tracked platforms differ in road mobility versus firepower and protection, and the K9MH grafts the K9 family fire system onto a wheeled chassis, addressing both segments.

Management has said that by keeping 3.5 to 4 years of ground-defense backlog while growing revenue and holding current margins, it targets average annual growth of 15% to 20% through 2030.

On the 2Q26 earnings call, it said talks on Poland's third K9 execution contract are proceeding on a localisation basis, with a conclusion hoped for within the year, and that expanding defense budgets across Europe, the Middle East, Asia and the Americas should allow it to sustain a ground-defense backlog of about 38 trillion won.

The company said first-half ground-defense order intake was 4.4 trillion won.

On export diversification, it disclosed on August 31 an execution contract with Spain's Indra Sistemas covering K9 howitzers and related items, though the contract value and end date were withheld for confidentiality, with disclosure deferred until November 28, 2026.

In the United States, the MTC prototype contract is worth $100.3 million, with a cumulative value including options of $262.9 million and scope for up to 18 guns.

In aerospace, development of a 4,500-pound-class unmanned aircraft engine targets completion in 2029, and the company plans to invest 750 billion won in unmanned system and engine development plus test and production facilities, while it injected about 220 billion won into its US commercial engine parts subsidiary in the first half of 2026 alone.

Construction of its first European production base in Romania for K9 and K10 began in February 2026, and local production of Chunmoo guided missiles is being pursued in Poland.

These localisation and investment plans carry upfront costs and execution risk, so the gap between announcement and actual revenue and profit recognition warrants monitoring.