Hanwha Systems

Hanwha Systems is built on three axes: defense electronics, ICT, and U.S. shipbuilding through Hanwha Philly Shipyard. Hana Securities, in a report dated June 4, 2026, put the 2025 revenue mix at 66.6% defense, 17.8% ICT and 15.7% other.

The defense unit's edge lies not in weapon platforms but in battlefield electronics such as radars, electro-optics, combat management systems, command and control, communications, avionics and fire-control systems; its multifunction radar goes into Cheongung-II and L-SAM, while AESA radar and avionics equipment are fitted to the KF-21.

Fire-control and electro-optical gear go into ground systems such as K2, K9 and K21, and combat management systems, shipboard radars and datalinks go into naval vessels, so expanded production and exports by Korean prime contractors flow directly into the defense unit's sales.

For Q2 2026, segment figures reported were defense revenue of KRW 700.6bn, ICT revenue of KRW 187.3bn with operating profit of KRW 20.8bn, and other revenue including Philly Shipyard of KRW 229.7bn with an operating loss of KRW 20.8bn.

The ICT unit rests on affiliate system-integration work such as Hanwha Life's next-generation platform, Hanwha Philly Shipyard's ERP and Hanwha Aerospace's smart plant, so its volatility is comparatively low.

Shipbuilding is the third revenue axis, created when the Philadelphia yard acquired jointly with Hanwha Ocean in December 2024 (Hanwha Systems holding 60%) was consolidated; it builds U.S. government-ordered vessels such as NSMVs plus affiliate shipping orders.

In satellites, the company has flown and operated its own SAR spacecraft and owns manufacturing capacity at the Jeju Space Center, competing with Korea Aerospace Industries for micro SAR satellite mass-production rights.

Within Korean defense electronics, competition and cooperation coexist with peers such as LIG Nex1 and Korea Aerospace Industries depending on the program.

On confirmed figures, 2025 revenue was KRW 3,664.2bn, up about 31% from KRW 2,803.7bn in 2024, yet operating profit fell to KRW 119.9bn from KRW 219.3bn and the operating margin narrowed to 3.3% from 7.8%. Net profit attributable to owners also halved to KRW 242.2bn in 2025 from KRW 454.3bn in 2024.

Behind this mix of top-line growth and margin dilution is the consolidation of shipbuilding: per annual-report details reported in April 2026, the Philly Shipyard posted 2025 revenue of KRW 565.5bn and a net loss of KRW 146.9bn.

Over a longer arc, operating profit of KRW 24.0bn (1.1% margin) with a KRW 76.6bn owners' net loss in 2022 gave way to 2023 revenue of KRW 2,453.1bn and operating profit of KRW 92.9bn, a peak margin in 2024, and then compressed margins again in 2025. Quarterly results are highly variable.

Q3 2025 showed revenue of KRW 807.7bn and operating profit of KRW 22.5bn but owners' net profit of KRW 151.7bn on large non-operating items, while Q4 2025 delivered record quarterly revenue of KRW 1,398.1bn with only KRW 5.8bn of operating profit.

Q1 2026 produced KRW 34.3bn of operating profit but a KRW 55.0bn owners' net loss; the company cited the Philly Shipyard's KRW 162.2bn revenue against a KRW 46.6bn operating loss, work stoppages from heavy snow in the U.S. northeast, plus valuation losses on the Austal stake, derivative valuation effects and higher interest expense.

In Q2 2026 revenue of KRW 1,117.6bn, operating profit of KRW 103.7bn and owners' net profit of KRW 67.1bn pushed the operating margin into the 9% range, and Kiwoom Securities called it an earnings surprise far above the market estimate of KRW 58.2bn.

Summing the four most recent quarters (Q3 2025 through Q2 2026), revenue exceeds KRW 4tn while the operating margin stays in the 4% range, indicating the Q2 improvement has not yet fully translated into annualized earnings power.

On the balance sheet, total equity rose to KRW 5,001.0bn at end-2025 from KRW 2,416.4bn a year earlier and the debt-to-equity ratio eased to 106.5% from 136.9%, though 2025 operating cash flow of KRW 78.7bn fell short of reported operating profit.

Shifting global security conditions have widened Korea's defense export pipeline, and Hanwha Systems benefits indirectly by supplying radars, fire-control units and combat systems into programs won by platform primes.

In Q1 2026 exports made up roughly 30% of defense revenue, above the 21% full-year level of the prior year, and the company attributed margin improvement to that shift.

Middle East demand continues for Cheongung-II class air defense, L-SAM related equipment and counter-drone laser systems, while commentary in late August 2026 noted the company is pursuing both direct exports to Europe and indirect exports via platform makers.

In space, demand to shorten reconnaissance revisit intervals expands program size; with the 425 program and the micro satellite system (about 40 SAR spacecraft) proceeding in sequence, one forecast sees revisit intervals approaching 30 minutes in the early 2030s.

In that market Hanwha Systems is developing the H model and Korea Aerospace Industries the K model as verification satellites, competing for final prime selection, so the outcome shapes the trajectory of space revenue.

U.S. shipbuilding ties together Korea-U.S. cooperation policy, Maritime Administration orders and affiliate shipping demand; the Philly Shipyard has set a goal of lifting capacity from roughly 1 to 1.5 vessels a year toward as many as 20 through facility modernization.

Restoring U.S. yard productivity, however, requires capital, labor and a learning curve, so there is typically a long lag between order wins and profit improvement. In sum, defense electronics and space sit in a demand-expansion cycle while U.S. shipbuilding remains in an early normalization phase.

Management has said it will broaden the 2026 export portfolio and keep winning major domestic programs to sustain steady growth. On the Q2 2026 release, a company official said stable revenue from large export projects and key domestic mass-production programs drove the earnings improvement.

On orders, Kiwoom Securities said in a July 29, 2026 report that second-half targets include Poland's K2 tank program and additional Middle East air-defense awards in defense, plus the multi-agency micro SAR satellite and military satellite communications system III in space.

In the same report Kiwoom Securities said higher in-house development spending and continued delivery of loss-making hulls at the Philly Shipyard would limit second-half earnings improvement, lowering its target price to KRW 121,000 from KRW 140,000 while maintaining a buy rating.

Hana Securities, in a new report on June 4, 2026, presented a target price of KRW 128,000, citing growth into a combined defense platform company spanning defense, space and shipbuilding.

On the yard, an investor relations executive said in April 2026 that loss-making hull deliveries are concentrated in the first half and that with more profitable containership work following, the full-year loss should shrink considerably versus the prior year; facility clearance procedures for warship construction and participation in the follow-on U.S. frigate bid are also cited.

In space, selection of the mass-production contractor for the roughly KRW 1.4tn, about 40-satellite multi-agency micro SAR program is pending, and the outcome ties directly to Jeju Space Center utilization and the medium-term revenue mix.

In short, room for margin improvement in core defense coexists with shipbuilding and development-cost burdens over the same period.