^{Photo: Bloomberg}

Shares Drop on Weak Quarterly Results

Shares of Hanwha Aerospace, South Korea’s largest defense company, fell more than 6% on Tuesday after the firm reported fourth-quarter results that missed market expectations on key metrics. The decline came despite solid long-term demand for its defense platforms and stronger-than-expected net profit for the quarter.

Investors reacted negatively to weaker revenue and a sharp drop in pre-tax profit, raising concerns about margin pressure and near-term earnings volatility after several years of exceptional growth.

Fourth-Quarter Performance Misses Forecasts

Hanwha reported fourth-quarter revenue of 8.33 trillion South Korean won, marking a strong 72.6% increase from a year earlier. However, the figure fell short of analyst expectations, which had forecast revenue of approximately 8.64 trillion won.

Pre-tax profit declined sharply by 72% year on year to 602 billion won, far below market estimates of around 1.2 trillion won. Operating profit also softened, slipping 16% to 753 billion won, signaling rising costs and a tougher operating environment toward the end of the year.

Net profit stood out as the sole positive surprise. Although it fell 54% from the previous year to 934 billion won, it still exceeded consensus expectations of roughly 717 billion won, providing some reassurance on bottom-line resilience.

Full-Year Results Show Mixed Picture

On an annual basis, Hanwha delivered explosive top-line growth. Full-year revenue surged 137% year on year to 26.61 trillion won, reflecting strong execution on large defense contracts and increased production volumes. Even so, the figure narrowly missed analyst estimates of about 27.01 trillion won.

Pre-tax profit for the year came in at 2.15 trillion won, down 19% from the previous year and well below expectations of 2.73 trillion won, highlighting the impact of higher costs, investments, and one-off factors.

Despite this, the company posted its fourth consecutive year of record operating profit. Operating income climbed 75% year on year to 3.03 trillion won, while net profit declined 16% to 2.14 trillion won. Importantly, the net profit figure beat market expectations of around 1.65 trillion won, reinforcing Hanwha’s longer-term earnings strength.

Strong Share Performance Before the Pullback

Tuesday’s sell-off followed a period of extraordinary share price gains. Hanwha Aerospace stock is still up nearly 19% year to date, building on a dramatic rally in previous years. Shares soared roughly 193% in 2025 and rose another 154% in 2024, making the company one of the standout performers on the Korean market.

Hanwha is currently the 11th largest stock on the Kospi index, with a market capitalization of approximately $42 billion, underscoring its growing importance within South Korea’s industrial and defense sectors.

Defense Demand Remains Robust

Despite the earnings disappointment, the long-term demand outlook for Hanwha remains strong. The company has been a major beneficiary of increased global defense spending following the Russia–Ukraine war, as European nations accelerate efforts to modernize their military capabilities.

Since 2022, Hanwha has secured multiple high-profile contracts across Europe. These include sales of its K9 Thunder self-propelled howitzer to countries such as Poland, Estonia, Romania, and Norway, as well as orders for its Chunmoo multiple launch rocket systems.

Analysts note that Europe’s push to replenish ammunition stockpiles and expand artillery capabilities continues to provide a multi-year pipeline of opportunities for Hanwha, even as quarterly results fluctuate.

Outlook Balances Growth and Execution Risks

While the latest earnings miss has weighed on investor sentiment, many market watchers see the sell-off as a reflection of elevated expectations rather than a deterioration in fundamentals. Hanwha’s order backlog, global footprint, and strategic role in allied defense supply chains remain intact.

Going forward, investors are likely to focus on cost control, margin stability, and the pace at which new international orders translate into sustainable profits, as Hanwha seeks to balance rapid expansion with financial discipline.