Hanwha Aerospace's market capitalization increases by 609% after the appointment of the 'son of the chairman'... Kim Dong-kwan's strategy worked

[Korea Financial Times, Shin Haeju] In the three years and five months since Kim Dong-kwan, the eldest son of Hanwha Group Chairman Kim Seung-yeon, became an in-house director of Hanwha Aerospace, the company's market capitalization has increased by more than 600%. This is interpreted as a result of Kim's strategic moves to reorganize the business structure, including consolidating and separating affiliates.

As of August 28, Hanwha Aerospace's market capitalization increased by 609.18% compared to March 29, 2021, according to the Financial Supervisory Service's electronic disclosure system. In terms of value, it increased by 12.61 trillion won. This period was used as a reference because it was the last trading day before the spinoff from the day Kim was listed as a registered executive officer of Hanwha Aerospace. Hanwha Aerospace's trading will be suspended until the 26th of this month due to the spinoff of its semiconductor equipment business and will be relisted on the 27th.

During the same period, LIG Nex1 and Korea Aerospace Industries (KAI), two major Korean defense companies, saw their market capitalization growth increase by 405.57% and 44.11%, respectively. Even if you add up their growth rates, they still fall far short of Hanwha Aerospace. “This is proof that the mid- to long-term business plan set by vice chairman Kim as CEO of Hanwha Aerospace's strategic division is progressing smoothly,” said an industry insider.

Vice Chairman Kim joined Hanwha Aerospace in March 2021 as the head of the Space Hub team, which oversees Hanwha Group's space business. At that time, he was promoted to vice chairman on August 29 of the following year in recognition of his leading role in the aerospace field, which is fostered as a future business, such as supplying the Nuri engine, and took over as the CEO of Hanwha Aerospace's strategic division.

During this time, Kim transformed Hanwha Aerospace into a business structure that is all-in on defense and aerospace. In November 2022, the company merged with Hanwha Defense and in April 2023 with Hanwha Defense sector to form an integrated entity. In May last year, the company expanded into maritime defense with the acquisition of Hanwha Ocean. Currently, defense sector accounts for 56.72% of Hanwha Aerospace's revenue and aviation accounts for 20.49%.

Recently, Hanwha Industrial Solutions was launched and the Hanwha Aerospace Security, Chip Mounter, and Semiconductor Equipment business were divided into newly established corporations. Hanwha Industrial Solutions has Hanwha Vision and Hanwha Precision Machinery as its subsidiaries 100%, and will merge with Hanwha Vision on January 1 next year to serve as a business holding company.

Performance is on the rise In the 2nd quarter of this year, Hanwha Aerospace posted consolidated sales of KRW 2.786 trillion and operating profit of KRW 358.8 billion. This is a 46% increase in revenue and 357% increase in operating profit compared to the second quarter of last year, when the integrated defense company was launched.

In the defense sector, sales reached KRW 1.3325 trillion and operating profit reached KRW 260.8 billion, up 122% and 1089% year-on-year, respectively. In particular, overseas sales increased more than fivefold year-on-year to KRW 761.4 billion, thanks to the supply of 6 K9 Munitions and 18 Tianmu to Poland.

The company also reportedly handed out about 30 billion won worth of incentives to its employees as a result of its record operating profit in the second quarter. When labor and management signed the 2024 wage agreement in July, it included a provision to pay “productivity improvement incentives,” with a maximum of 5 million won per employee, totaling 30 billion won.

An official from Hanwha explained, "The two companies (Hanwha Aerospace and Hanwha Industrial Solutions) plan to establish a quick and professional decision-making system through independent management in the future to maximize management efficiency and corporate value."

Shin Haeju (hjs0509@fntimes.com)