PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩50 per share · Prices as of the 2026-10-02 close
Hwaseung Enterprise, the dedicated footwear manufacturer for Adidas, posted a net loss in 2025 and has yet to show a clear quarterly recovery through 2026 even as its customer brand posts strong global results.
The company operates manufacturing subsidiaries in Vietnam, Indonesia, and China, dedicated entirely to producing Adidas footwear on an ODM basis.
In 2025, revenue was KRW 1.5644 trillion (down 2.8% year on year), operating profit was KRW 35.7 billion (down 56.8%), and net income attributable to owners swung from a prior-year profit to a loss of KRW 27.1 billion.
After an operating loss of about KRW 4.8 billion in the first quarter of 2026, the company returned to an operating profit of roughly KRW 7.3 billion in the second quarter, but net income attributable to owners has remained negative for five consecutive quarters.
Domestic vendors producing for Nike posted record results at their Vietnam units, while Hwaseung has moved in the opposite direction despite Adidas's strong brand performance, a pattern described as a decoupling.
The debt ratio rose from 149.6% in 2022 to 180.4% in 2025, while operating cash flow reached KRW 132.3 billion in 2025, the highest level of the past four years.
Hwaseung Enterprise is a holding company whose core business is footwear original development manufacturing (ODM), operating overseas production subsidiaries including Hwaseung Vina in Vietnam, Hwaseung Indonesia, and Changtian Footwear Dalian in China.
The company produces Adidas footwear on an exclusive basis, with output divided into the Adidas line and the Reebok line. In 2019 it acquired Vietnamese cap maker Unipax, expanding into sports cap OEM production for clients including Nike and Under Armour.
In 2020 the company hired former Nike executives and entered sports apparel OEM, an attempt to diversify beyond its footwear-centered structure. Its chemical and materials segment supplies components such as outsoles to group companies.
In the global footwear ODM market, Taiwan's Pou Chen holds roughly 20% of the global sports and casual footwear market, the dominant scale leader, with Feng Tay also operating at large scale, making Hwaseung comparatively smaller by size.
Domestically, TKG Taekwang and Chang Shin Inc., both dedicated Nike producers, compete and coexist with Hwaseung in the same Vietnamese production base. Concentration on a single brand customer, Adidas, provides a stable order relationship but also means results are heavily tied to that brand's own product cycle.
| Quarter | Revenue | Operating profit | Op. margin |
|---|---|---|---|
| 2025Q2 | ₩387B | ₩9.3B | 2.4% |
| 2025Q3 | ₩355.8B | ₩100M | 0.0% |
| 2025Q4 | ₩398.2B | ₩12.8B | 3.2% |
| 2026Q1 | ₩350.9B | -₩4.8B | −1.4% |
| 2026Q2 | ₩397.5B | ₩7.3B | 1.8% |
| Year | Revenue | Operating profit | Net income (parent) | Op. margin | ROE | Debt-to-equity |
|---|---|---|---|---|---|---|
| 2022 | ₩1.7T | ₩52.8B | -₩7.5B | 3.2% | −1.4% | 149.6% |
| 2023 | ₩1.2T | ₩13B | -₩25.3B | 1.1% | −4.9% | 143.2% |
| 2024 | ₩1.6T | ₩82.6B | ₩33.1B | 5.1% | 6.3% | 172.7% |
| 2025 | ₩1.6T | ₩35.7B | -₩27.1B | 2.3% | −5.9% | 180.4% |
Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-08-21
Consolidated revenue in 2025 was KRW 1.5644 trillion, down 2.8% from KRW 1.6096 trillion in 2024, while operating profit fell 56.8% to KRW 35.7 billion from KRW 82.6 billion, pushing the operating margin down from 5.1% to 2.3%.
Net income attributable to owners swung from a profit of KRW 33.1 billion in 2024 to a loss of KRW 27.1 billion in 2025; a media report noted that a foreign currency translation swing of more than KRW 50 billion—from a gain of KRW 28.4 billion in 2024 to a loss of KRW 22.1 billion in 2025—contributed to the widened net loss.
On a quarterly basis, operating profit in the third quarter of 2025 fell to near breakeven at about KRW 0.14 billion before partially recovering to KRW 12.8 billion in the fourth quarter.
The first quarter of 2026 then posted an operating loss of about KRW 4.8 billion, before the second quarter of 2026 returned to an operating profit of roughly KRW 7.3 billion.
Net income attributable to owners, however, remained negative in all five quarters from the second quarter of 2025 through the second quarter of 2026, with the trailing four-quarter sum (third quarter of 2025 through second quarter of 2026) showing a net loss of about KRW 28.8 billion.
Looking at a longer annual window, three of the last four years—2022 (a loss of KRW 7.5 billion), 2023 (a loss of KRW 25.3 billion), and 2025 (a loss of KRW 27.1 billion)—ended in net losses, with 2024 the only profitable year, underscoring significant earnings volatility.
Operating cash flow, by contrast, has steadily held up regardless of net income swings: KRW 96.8 billion in 2022, KRW 59.1 billion in 2023, KRW 80.9 billion in 2024, and KRW 132.3 billion in 2025.
Vietnam is the largest production base for global sportswear brands including Nike and Adidas, with Nike reportedly producing more than half of its footwear there and Adidas around 41%.
The appeal of Vietnam as a low-cost production hub has gradually eroded amid rising labor costs, yet global brands have continued to increase their production share in the country. The average US tariff rate on Vietnamese footwear is estimated at around 13.6%, an added cost burden that brands and vendors must share.
When reciprocal tariffs were announced in 2025, Nike stated that simultaneous tariff increases on China and Vietnam could cause a double-digit revenue decline in the affected quarter, illustrating how directly tariffs affect ordering and inventory policy across the industry.
In the global footwear ODM market, Taiwan's Pou Chen remains the dominant leader with roughly 20% of the global sports and casual footwear market, with Korean vendors forming the next tier.
Notably, brand performance and vendor performance do not always move in the same direction—even as Nike has struggled recently, its dedicated Korean vendors posted record results at their Vietnam units, while Hwaseung, dedicated to Adidas, has shown the opposite pattern even as Adidas performs strongly.
This is generally attributed to vendor-specific factors—order timing, inventory policy, foreign exchange, and product mix—that lag behind the brand's own sales cycle.
The weakness in the second half of 2025 has been attributed to key customer Adidas managing orders conservatively as it absorbed tariff-related cost pressure.
In an October 2025 report, Daishin Securities noted that as tariffs took full effect from the third quarter, brands passed cost burdens onto vendors, making margin declines unavoidable, and suggested that order increases and margin recovery could begin from the second quarter of 2026.
In practice, operating profit in the second quarter of 2026 turned positive at about KRW 7.3 billion after an operating loss the prior quarter, though the company still failed to escape a net loss on a bottom-line basis.
The company's core competitive asset—its long-standing partnership and production infrastructure with Adidas—remains intact, but the pace and timing of full order normalization have not yet been clearly confirmed.
Industry-wide expectations existed for expanded sporting goods demand tied to the 2026 World Cup in North America, but since that event has already passed as of this report's timing in September 2026, whether it translated into actual orders and revenue will need to be confirmed through upcoming quarterly disclosures.
The direction of US tariff policy, particularly any rate adjustments affecting Vietnam and Indonesia, remains a variable that directly affects costs and margins.
The company has previously indicated that sales of related products tend to expand following major sporting events, suggesting that post-event order flow will be key to any recovery this time as well.
With recent net losses persisting, Hwaseung Enterprise sits in a range where conventional earnings-based valuation metrics are difficult to apply meaningfully.
Its price-to-book ratio sits below 1, meaning shares trade at a discount to accounting net asset value, a fact that should be considered alongside the steady decline in shareholders' equity since 2022 driven by repeated net losses.
Dividends have continued despite the earnings deficit, but whether that continues going forward depends on how the unstable earnings base evolves.
The stock's valuation band has swung considerably in the past between hopes of an Adidas order recovery and concerns over earnings weakness, suggesting that tracking the actual progress of order and margin recovery matters more than any single point-in-time multiple.
Ultimately, the direction of valuation appears tied to how much the operating margin recovers from its recent 2.3% level and when the run of net losses comes to an end.
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 2026-08-21
Adidas, for which Hwaseung is the exclusive footwear manufacturer, is reported to be posting record-level results recently. If that brand strength eventually translates into higher vendor order volumes with a time lag, Hwaseung's earnings recovery could accelerate.
So far, however, a decoupling between brand performance and vendor performance has been observed, making the timing of any reconnection a key point to watch.
Operating cash flow actually increased from KRW 96.8 billion in 2022 to KRW 132.3 billion in 2025, remaining steady even through periods of net loss. This suggests non-cash items such as depreciation and working-capital management have offset much of the net income volatility. Stable cash flow can support capacity for capital spending or continued dividend payments.
The price-to-book ratio remains below 1, meaning the shares trade at a level below the company's accounting net asset value. Some observers may view this gap as having room to narrow if earnings recovery is confirmed, though that would be conditional on earnings improvement materializing first.
Net income attributable to owners posted a loss in every quarter from the second quarter of 2025 through the second quarter of 2026. In the first quarter of 2026, even operating profit itself turned negative (a loss of about KRW 4.8 billion), raising questions about the sustainability of any recovery.
While operating profit returned to positive in the second quarter, the net loss continued, making it premature to call this a full turnaround.
The average US tariff on Vietnamese footwear is estimated at around 13.6%, and under a structure where brands pass on cost burdens to vendors, Hwaseung's margins have taken a direct hit. Daishin Securities noted in an October 2025 report that margin declines were unavoidable once tariffs took full effect. Any further changes to tariff policy could reintensify cost and margin pressure.
The foreign currency translation difference on overseas operations reportedly swung by more than KRW 50 billion, from a gain of KRW 28.4 billion in 2024 to a loss of KRW 22.1 billion in 2025, suggesting a large portion of the net income swing stemmed from non-operating currency factors.
This adds to accounting-level net income volatility independent of operating performance. A similar swing in the opposite or same direction cannot be ruled out depending on future currency movements.
Given the company's heavy reliance on overseas production subsidiaries, fluctuations in the Vietnamese dong, Indonesian rupiah, and other local currencies against the US dollar directly affect results.
In 2025, the foreign currency translation difference swung by more than KRW 50 billion in an unfavorable direction, contributing to the widened net loss. If currency volatility increases further, similar non-operating swings could recur.
The average US tariff on Vietnamese footwear is estimated at around 13.6%, and changes in trade policy directly affect brand order volumes and cost-allocation practices.
As illustrated when Nike stated during the 2025 reciprocal tariff announcement that a tariff hike could cause a double-digit revenue decline in the affected quarter, tariffs can deliver immediate shocks to industry-wide demand and ordering.
Hwaseung's heavy reliance on a single customer, Adidas, means its results are highly sensitive to that brand's own tariff-response strategy.
The footwear ODM industry is highly labor-intensive, and rising labor costs at production hubs such as Vietnam have been a persistent cost pressure. Some observers note that the appeal of Vietnam as a low-cost production base is gradually eroding as labor costs rise.
Nearby production hubs such as Indonesia have also reported large-scale workforce reductions attributed to order declines, keeping labor-related risk and production stability management an ongoing challenge.
Check whether the operating profit recovery seen in the second quarter of 2026 continues in the third-quarter results, and whether the net loss attributable to owners—negative for five straight quarters—begins to narrow.
Continue monitoring any changes to US tariff policy on footwear from Vietnam and Indonesia. Rate adjustments could directly affect brand ordering policy and vendor margin allocation.
Track signs of Adidas order normalization through Vietnamese footwear export statistics and any company order-related disclosures. The key point to watch is when the brand's strong performance begins to translate into vendor results.
Check the FY2026 annual results and dividend policy disclosure to see whether the string of net losses turns around on an annual basis and whether dividends continue despite the earnings deficit.
Hwaseung Enterprise is a Vietnam-centered ODM manufacturer dedicated to producing Adidas footwear, and it currently shows a clear decoupling between its customer brand's strong global performance and its own results.
In 2025, tariff cost pass-through and foreign exchange swings combined to reduce both revenue and operating profit, flipping net income from a profit to a loss, and 2026 has continued to show a mixed pattern with an operating loss in the first quarter followed by a return to operating profit in the second quarter.
Net income attributable to owners has failed to escape losses for five consecutive quarters, and the trailing four-quarter sum also remains in a net loss position.
That said, operating cash flow has steadily improved regardless of the net loss trend, and the fact that shares trade at a discount to net asset value is also worth noting.
The direction of tariff policy, currency volatility, and the timing at which Adidas's own order strength actually shows up in vendor results remain the key variables that will determine the future earnings trajectory.
Investors should continue to monitor upcoming quarterly results and tariff/trade policy disclosures before forming any judgment.
Report written 2026-09-05 · Data as of 2026-09-04
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