KOSPIAutomotive018880

Hanon Systems

₩3,835▲ 4.35%2026-10-02 close

Market Cap

₩3.9T

Turnover

₩71.1B

Volume

18.7M

Shares out.

1.03B

PER

—

PBR

0.9×

EPS

-₩5

Dividend Yield

0.00%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩0 per share · Prices as of the 2026-10-02 close

Report overview

Cost Fix Confirmed, Order Intake Still Pending

Restructuring and cost-ratio improvement since joining the Hankook & Company group have put quarterly operating profit back on a recovery track, but weak new order intake and volatile bottom-line results remain the key swing factors for durability.

1
Second-quarter 2026 revenue was KRW 2.875 trillion with operating profit of KRW 103.7 billion, a 3.6% operating margin, extending a run of quarterly operating profit above the KRW 90 billion mark (confirmed filings).
2
For 2025, revenue was KRW 10.884 trillion and operating profit KRW 270.4 billion (2.5% margin), a sharp margin recovery from 2024 (KRW 9.999 trillion, KRW 95.5 billion, 1.0%), yet the owners' net line stayed in the red for a second straight year.
3
Most of the roughly KRW 983.4 billion raised in the rights offering went to debt repayment, cutting the debt-to-equity ratio from 254.2% in 2024 to 168.1% in 2025.
4
Management targets KRW 11 trillion of 2026 revenue and a recovery to a 5% operating margin, and said a first-half cost-of-goods ratio of 89.3% reached its original 2027 target level ahead of schedule.
5
On the other hand, second-quarter new orders were USD 290 million and first-half cumulative orders USD 342 million, only about 26% of the USD 1.3 billion annual target.

Business structure

Hanon Systems designs and manufactures vehicle climate control and thermal management systems, supplying HVAC modules, compressors, heat exchangers, fluid transport parts and battery and power-electronics cooling solutions at the system level.

The company says it holds a thermal management portfolio spanning every powertrain, from internal combustion engines to hybrids, battery electric vehicles, extended-range electric vehicles and fuel-cell vehicles.

As of the second quarter of 2026, electrified (xEV) products accounted for 31% of total revenue, helped by higher European volumes. Its customer base spans Korean automakers including the Hyundai Motor Group as well as major North American and European OEMs.

According to DS Investment & Securities, second-quarter volumes to Mercedes-Benz rose 36% year on year and to BMW 19% in Europe, while the Americas fell 6.0% to KRW 806 billion and Korea fell 2.0% to KRW 782 billion.

On ownership, as of March 11, 2026 Hankook Tire & Technology held 51.07% and related party Hahn & Co Auto Holdings 14.3%.

Since the group transition, execution-focused regional business groups have been created for Asia-Pacific, China, the United States and Europe, with sales, product planning, production, quality, purchasing and finance functions transferred from global headquarters, alongside consolidation of overseas plants.

Competitively, the company bids for global platform awards against large Japanese and European thermal management suppliers, where system integration capability and cost competitiveness are decisive.

Management is also pushing into non-automotive areas such as data center liquid cooling and energy storage system thermal management, and set up a dedicated global aftermarket organization in January 2026.

Earnings trend

Quarterly revenue · Operating profit

₩2.9T₩64.3B25Q2₩2.7T₩95.3B25Q3₩2.7T₩89.7B25Q4₩2.7T₩97.2B26Q1₩2.9T₩103.7B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩8.6T₩256.6B2022₩9.6T₩277.3B2023₩10T₩95.5B2024₩10.9T₩270.4B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩2.9T	₩64.3B	2.2%
2025Q3	₩2.7T	₩95.3B	3.5%
2025Q4	₩2.7T	₩89.7B	3.3%
2026Q1	₩2.7T	₩97.2B	3.5%
2026Q2	₩2.9T	₩103.7B	3.6%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩8.6T	₩256.6B	₩20.4B	3.0%	0.9%	283.9%
2023	₩9.6T	₩277.3B	₩51B	2.9%	2.1%	268.5%
2024	₩10T	₩95.5B	-₩363.3B	1.0%	−12.7%	254.2%
2025	₩10.9T	₩270.4B	-₩198.5B	2.5%	−5.3%	168.1%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

On confirmed filings, revenue rose for four consecutive years: KRW 8.628 trillion in 2022, KRW 9.559 trillion in 2023, KRW 9.999 trillion in 2024 and KRW 10.884 trillion in 2025.

The operating margin, however, slid from 3.0% in 2022 and 2.9% in 2023 to 1.0% in 2024 before recovering to 2.5% in 2025, and that collapse and rebound is the core of the recent earnings story. In absolute terms, operating profit shrank to KRW 95.5 billion in 2024 before recovering to KRW 270.4 billion in 2025.

The owners' net line, by contrast, went from a KRW 51.0 billion profit in 2023 to losses of KRW 363.3 billion in 2024 and KRW 198.5 billion in 2025, two straight loss years.

The quarterly trend is clearly upward: operating profit went from KRW 64.3 billion (2.2% margin) in the second quarter of 2025 to KRW 95.3 billion in the third quarter, KRW 89.7 billion in the fourth, KRW 97.2 billion in the first quarter of 2026 and KRW 103.7 billion (3.6%) in the second quarter, four consecutive quarters above KRW 90 billion.

The fourth quarter of 2025 stands out, however, with a KRW 212.8 billion owners' net loss despite KRW 89.7 billion of operating profit, so that over the last four reported quarters operating profit totals KRW 385.9 billion while the owners' net line is still slightly negative.

Management attributed first-half results to currency effects, higher electrified volumes at European customers and operating efficiency from global restructuring, and said material and freight cost efficiencies lowered the first-half cost-of-goods ratio to 89.3%.

The second-quarter operating profit shortfall versus market expectations was attributed to soft top-line growth and higher selling and administrative expenses as the development-cost capitalization ratio was reduced.

On the balance sheet, total equity rose from KRW 2.999 trillion in 2024 to KRW 3.913 trillion in 2025 and the debt-to-equity ratio fell from 254.2% to 168.1%, though operating cash flow declining from KRW 569.3 billion in 2024 to KRW 112.3 billion in 2025 also warrants attention.

Industry analysis

End demand in the global auto market has clearly lost momentum. Global light vehicle industry demand in 2026 is projected at about 87.93 million units, up just 0.2% year on year, with slowdowns in the two core markets of the United States and China dragging on the total.

Growth in the electrified vehicle market is also expected to slow to around 10% on base effects and softness in the United States and China, where reduced tax credits and looser regulation may prompt automakers to moderate the pace of electrification. Views on the parts sector as a whole are cautious.

NICE Investors Service assigned auto parts makers the weakest of its three 2026 outlook categories, warning that tariff-driven relocation of vehicle assembly toward the United States could widen revenue volatility for suppliers based in Korea.

With the Hyundai Motor Group planning to lift parts localization from 60% in 2025 to 80% by 2030, competition for new model awards and unit price pressure are seen as structural burdens.

Suppliers that already spent heavily on electrification capacity face weakening growth momentum while utilization at those new lines remains low.

Within that setting, Hanon Systems is relatively defensive in that it is less dependent on any single automaker, carries exposure to European premium customers, and offers a product range covering hybrids and extended-range vehicles.

Conversely, running a production network of roughly fifty plants worldwide means fixed-cost strain surfaces quickly in regions where volumes decline.

Outlook

Management's targets are explicit. After passing KRW 10 trillion in annual revenue for the first time in 2025, the company set KRW 11 trillion of 2026 revenue and a recovery to around a 5% operating margin as core goals.

At the second-quarter 2026 release, it said the first-half cost-of-goods ratio of 89.3% had reached its original 2027 target early and that the operating margin should approach roughly 4% this year.

Assuming completion of the rights offering, the company expected the debt-to-equity ratio to improve from about 246% at the end of the third quarter of 2025 to roughly 164%. Order intake makes the second half pivotal.

New orders were USD 290 million in the second quarter and USD 342 million for the first half, only 26% of the USD 1.3 billion annual target; the company said large awards from the Hyundai Motor Group and Ford are pending in the second half, and that it is preparing for the Hyundai eM platform, resetting relationships with Chinese local automakers and holding talks with German premium OEMs.

New businesses remain early stage. Valve prototypes have been delivered to key customers with the company now at the request-for-quotation stage, while the robotaxi thermal management system for Amazon's autonomous unit Zoox entered mass production this year after eight years of collaboration.

Management expects both revenue and profitability in the second half to improve versus the first half on higher customer volumes and cost recovery.

Valuation

PER

—

PBR

0.9×

ROE

-0.1%

EPS

-₩5

BPS

₩4,004

Dividend per share

₩0

Earnings-based multiples cannot be computed at present.

Because of the large net loss in the fourth quarter of 2025, the owners' net line over the last four reported quarters is slightly negative, so no price-to-earnings figure is produced; what is verifiable is that operating profit over the same span totaled KRW 385.9 billion.

Against book value, the share price is trading around the level of net assets per share, and this reflects a much larger equity base after the rights offering enlarged the denominator.

The change in share count matters too: Hana Securities noted the rights offering lifted the share count from 678 million to 1,026 million, up 51%.

No cash dividend per share was disclosed for the most recent fiscal year, so no dividend yield is registered, and a credit rating agency has noted that dividend burden should ease as balance-sheet repair became the top priority after the change in largest shareholder. Brokerage views diverge.

Hana Securities, in an early August 2026 report, maintained a Neutral rating and cut its target price from KRW 4,700 to KRW 3,900, citing concerns over growth and free cash flow sustainability and stating that per-share value is "not sufficiently attractive." Hyundai Motor Securities, in an August 3, 2026 report, lowered its target price from KRW 3,900 to KRW 3,700.

By contrast, BNK Investment & Securities, in a May 7, 2026 report, raised its target price from KRW 3,800 to KRW 5,000 on profitability improvement from cost efficiencies.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Cost ratio improving faster than target

The first-half 2026 cost-of-goods ratio came in at 89.3% on material and freight cost efficiencies. The company said this reached the level originally targeted for 2027 ahead of schedule and that the operating margin should approach roughly 4% this year.

Confirmed filings show a stepwise climb from a 1.0% annual operating margin in 2024 to 2.5% in 2025 and 3.6% in the second quarter of 2026. With margins improving even without top-line growth, the question is whether the cost structure itself has genuinely changed.

Lower balance-sheet burden

Most of the roughly KRW 983.4 billion raised in the rights offering, about KRW 883.4 billion, was allocated to debt repayment. In confirmed filings, the debt-to-equity ratio stayed above 250% for years at 283.9% in 2022, 268.5% in 2023 and 254.2% in 2024, before falling to 168.1% in 2025.

The company said net interest expense fell by KRW 28.8 billion year on year and expects the rights offering to ease interest costs further. Largest shareholder Hankook Tire & Technology committed to fully subscribe its allocated portion.

Electrification mix and new business options

The second-quarter improvement combined currency effects, expanded electrified component supply centered on European automakers and global restructuring benefits, with electrified products at 31% of revenue.

Citing power and thermal management demand from spreading AI data centers, the company is reviewing new opportunities including data center liquid cooling systems and energy storage thermal management solutions.

It has laid groundwork to add large battery cell makers and power infrastructure firms as new business-to-business customers beyond automakers, and has moved to the request-for-quotation stage after delivering valve prototypes. These initiatives, however, have yet to be confirmed as revenue.

Bear factors

Weak new order run-rate

New orders were USD 290 million in the second quarter and USD 342 million cumulatively in the first half, only about 26% of the USD 1.3 billion annual target. Samsung Securities noted in its first-quarter review that two consecutive years of weak order intake point to stagnant revenue.

The same report said momentum confirming future growth, such as large new awards or entry into energy storage cooling, would be needed for a share price recovery. Because orders typically convert into revenue years later, the current run-rate weighs on the medium-term top line.

Volatility in the bottom line

In the fourth quarter of 2025 the owners' net loss reached KRW 212.8 billion even though operating profit was KRW 89.7 billion.

As a result the 2025 owners' net line was a KRW 198.5 billion loss, a second straight annual loss after KRW 363.3 billion in 2024, and the sum of the last four reported quarters remains negative.

Where the gap between operating and final results is that wide, the timing of restructuring and asset-related charges dominates how earnings should be read. Separate from the return to net profit in the first half of 2026, year-end volatility remains an item to monitor.

End demand and regional mix pressure

Second-quarter revenue in the Americas fell 6.0% year on year to KRW 806 billion on North American inventory adjustments at Ford and General Motors, while Korea fell 2.0% to KRW 782 billion after a supplier fire. Europe's growth rate also slowed from 15% in the first quarter to 9% in the second.

Sector-wide, forecasts point to slower electric vehicle growth on pro-combustion policy and the end of tax credits in the United States plus intensifying competition from expanded Chinese electric vehicle output.

Continued volume declines in specific regions could again expose fixed-cost strain across the global production network.

Risk factors

Ownership structure and overhang

As of March 11, 2026, Hahn & Co Auto Holdings held 14.3%, and a share pledge agreement covering that stake was signed on March 11, 2026.

In March 2026 Hahn & Company agreed with its acquisition finance lenders to extend loan maturities by two years, with the remaining acquisition financing understood to be around KRW 800 billion.

Daishin Securities, in a September 2025 report, flagged a January 2027 put option held by the financial sponsor as a variable. How the sponsor's stake is ultimately resolved could affect the ownership structure and share supply.

Trade and policy

Commentary notes that maintaining the reduction of United States tariffs from 25% to 15% would help export conditions, but that global trade uncertainty remains a variable.

Despite the lower rate, the Hyundai Motor Group is strengthening a strategy of expanding United States output to capture duty drawback benefits, operating 300,000 units at its metaplant on top of roughly 700,000 units of existing capacity and planning 200,000 more by 2028.

Relocation of vehicle assembly simultaneously changes suppliers' regional utilization and pricing negotiations. How the company shares tariff-related costs with customers feeds directly into margins.

Cash flow sustainability

On confirmed filings, operating cash flow shrank from KRW 517.4 billion in 2023 and KRW 569.3 billion in 2024 to KRW 112.3 billion in 2025.

Hana Securities noted that tangible capital expenditure relative to depreciation has fallen from around 100% historically to the 50% range in 2025 and 2026, making current free cash flow hard to view as sustainable.

At the same time, commentary held that although a research and development capitalization ratio down to the low 20% range makes profitability look weaker than in the past, underlying cash generation has improved. Whether cash freed up by lower investment can coexist with future order competitiveness is the item to verify.

What to watch next

Late October to early November 2026
Third-quarter 2026 results. Watch whether the 89.3% first-half cost-of-goods ratio holds and whether the quarterly operating margin tracks the path toward the roughly 4% full-year level management cited.
During the fourth quarter of 2026
Progress against the USD 1.3 billion annual order target and outcomes of large awards. Key items are the Hyundai Motor Group and Ford awards management flagged as pending for the second half, plus preparation for the Hyundai eM platform.
Fourth quarter 2026 to first half 2027
Whether the request-for-quotation stage in data center liquid cooling and energy storage thermal management converts into actual awards and production contracts. The point at which non-automotive revenue starts being disclosed separately is the yardstick.
Around January 2027
Timeline around the financial sponsor's stake. Watch for disclosure changes concerning the share pledge on Hahn & Co Auto Holdings' holding, 14.3% as of March 2026, and the put option timing discussed in the market.
Around February 2027
Confirmation of full-year 2026 results and dividend policy. The points to watch are whether items that sharply decoupled operating profit from the final result, as in the fourth quarter of 2025, recur, and whether a cash dividend absent in the prior fiscal year resumes.

Overall view

Hanon Systems' recent performance can be summed up as flat top line with recovering margins.

On confirmed filings, annual revenue rose from KRW 8.628 trillion in 2022 to KRW 10.884 trillion in 2025, yet the operating margin swung from 3.0% to 2.9%, 1.0% and 2.5%, before reaching KRW 103.7 billion (3.6%) in the second quarter of 2026, a fourth consecutive quarter above KRW 90 billion.

The 89.3% first-half cost-of-goods ratio is the evidence management cites for structural cost improvement, and allocating rights offering proceeds to debt repayment lowered the debt-to-equity ratio from 254.2% in 2024 to 168.1% in 2025.

Against that, the KRW 212.8 billion owners' net loss in the fourth quarter of 2025, the sharp drop in operating cash flow and first-half cumulative orders at just 26% of the annual target stand as counterarguments to durability.

The industry backdrop is unhelpful as well: NICE Investors Service placed auto parts makers in the weakest of its three 2026 outlook categories.

Brokerage views are split, with Hana Securities maintaining Neutral and cutting its target price in early August 2026 versus BNK Investment & Securities raising its target price in May 2026.

Ultimately, the tasks for the next quarter are to judge whether the cost improvement is one-off efficiency or structural change, and whether the large second-half awards are actually signed. This report is for information purposes and contains no buy or sell recommendation.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.