SK Securities reevaluated its investment strategy on the 27th, highly evaluating the possibility of securing orders for 4-stroke engines for US data centers as a future growth driver for Hanwha Engine, and maintained its investment opinion as 'Buy'. The securities firm raised its target price from 72,000 won to 100,000 won. This is because market expectations for Hanwha Engine have risen sharply amid a trend where major engine manufacturers such as Finnish Wärtsilä and HD Hyundai Heavy Industries have consecutively confirmed orders for US data center projects. Experts foresee that Hanwha Engine will produce MAN 35/44G (10MW class) or MAN 51/60G (18MW class) models based on the license cooperation it concluded with Evergreen and deliver them directly to the US. It is confirmed that inquiries have been received from relevant customers, and if this order possibility materializes, there is ample room to adjust upward future profit estimates and expand multiples representing profitability relative to enterprise value.
However, researcher Han Seung-han pointed out several constraints even amidst positive prospects. First, since the engine is based on third-party technology rather than an in-house design license, it is difficult to expect the same level of margin rates as companies like Wärtsilä or Himsen. Additionally, since Evergreen is implementing an expansion strategy for promotions in the early stages to increase its market share in the 4-stroke engine market, concerns exist that short-term price competition may occur. Considering these structural factors comprehensively, the researcher explained that a valuation applying a discount multiple compared to the same industry is appropriate. In other words, this means that while the potential is great, a conservative valuation is being maintained in consideration of the current margin structure and market entry strategy.
Meanwhile, Hanwha Engine has also shown remarkable growth in its quarterly financial results. As of the first quarter, sales revenue increased 8.5% year-over-year to 345.2 billion won, and operating profit surged 130.4% to 51.4 billion won. In particular, the operating profit far exceeded the level of 44.7 billion won expected by securities firms, surpassing market expectations. While the effect of an increase in average selling price contributed to this remarkable improvement in performance, the more decisive factor is analyzed as cost reduction through production process efficiency. From the point that synergy between manufacturing process optimization and cost structure improvement greatly boosted net profit, it can be confirmed that this is a result of strengthening internal capabilities rather than a simple price increase.
Experts believe that combining the possibility of securing orders in the US data center market with such performance leaves ample room for stock price appreciation for Hanwha Engine. The combination of technology accessibility through Evergreen and in-house production efficiency is creating a virtuous cycle, which is expected to become the core driver of long-term enterprise value growth. However, the impact of dependence on license-based technology and promotion strategies for initial market development on margin rates remains a variable that needs to be monitored continuously. It will be important to observe closely whether the discounted multiple can gradually normalize while closely watching future order news and earnings announcements.