This week's Korean Stock (15th Dec. 2025)
With the KOSPI blasting up 1.38% to 4,167 on Friday (December 12, 2025) amid Wall Street records and Broadcom's AI earnings beat reigniting semis, the index is up 66.5% YTD and eyeing Macquarie's 6,000 call for 2026 on 48% EPS growth. But amid the froth, defense is the unheralded alpha: global conflicts are turbocharging arms exports (up 25% YoY), and Korea's the No. 2 exporter behind the U.S.
For Monday's tactical entry (December 15, 2025), I'm dialing in on Hanwha Aerospace Co., Ltd. (012450.KS), the mid-tier powerhouse in engines, missiles, and space tech. Closing at 955,000 KRW on Friday (up 5.64% on order buzz), it's primed for 15-25% upside into Q1, with a market cap of ~46.5T KRW offering liquidity without mega-cap bloat—ideal for rotating from overcooked AI names.
Macroeconomic Tailwinds
Korea's defense sector is in a golden age, snagging 15%+ of global orders as NATO hikes spending to 2% GDP amid Ukraine/Middle East flare-ups, per SIPRI data. Hanwha thrives here: its K9 howitzers and Chunmoo rockets dominate exports (Poland's 1T KRW deal last month alone), with U.S. alliances funneling F-35 engine work and space launches tying into Artemis. Domestically, the 2025 defense budget swells 8% to 60T KRW, cushioned by OECD's 1.0% GDP hold despite PMI dips. Globally, Trump's "peace through strength" rhetoric (post-inauguration) could unlock $10B+ in Indo-Pacific deals, while Fed cuts (85% odds for January) ease won pressures at 1,385/USD, juicing capex. Watch Monday's U.S. retail sales; a soft print reinforces risk-on, lifting exporters 3-5%.
Financial Fundamentals
Hanwha's a turnaround beast post-2022 reorg—TTM revenue exploded to 23.1T KRW (up 106% YoY on backlog fills), netting 2.3T KRW profit with margins at 10% (doubled via pricing in munitions). Trailing P/E of 17.6x hugs the sector's 18x average, a discount to peers like LIG Nex1 (22x), undervaluing its 55% EPS growth forecast for 2026. ROE? A stellar 29.5% on asset turns, with net debt/EBITDA at 1.2x backed by 5T KRW liquidity. Consensus from 22 analysts screams "Strong Buy," targeting 1,400,000 KRW (47% pop), propelled by Q4 handovers (e.g., Australian submarine bids).
Refined Financial Snapshot: Torque Without the Bloat
Q3 2025 (latest, November release) nailed the inflection: Revenue 5.8T KRW (up 77% YoY), op profit 780B KRW (margins 13.4%, +5pts on cost efficiencies), flowing to TTM EPS of 50,947 KRW. Shares outstanding steady at 51.4M (minimal dilution), supporting that 17.2x forward P/E—bargain for 10.2% earnings CAGR through 2028. Balance sheet gleams: Debt/assets 45% (capex-friendly), net margin 9.95% resilient to steel swings. Forward, 2025 sales growth hits 141%, 2026 at 177% on 20T KRW backlog (60% covered through 2027). Market cap's up 153% YTD to 46.5T KRW, but EV/EBITDA ~8x lags peers at 10x—your entry window post-pullback.
Risks: The Flip Side (Because Nothing's Risk-Free)
Straight talk: Geopolitics cuts both ways—de-escalation in Ukraine could trim orders 10-15%, though diversified exports (40% U.S./EU) mitigate. Supply chain snarls in rare earths (for engines) from China tensions might hike costs 5%, but fixed contracts cap exposure. Domestically, election-year budget scrutiny could delay 2026 hikes, and if Fed skips January (15% tail risk), won to 1,400/USD squeezes imports. Labor inflation at yards? Sector-wide, but Hanwha's 70% export skew and Exmar-like options buffer it.
Bottom line: Hanwha's the defense pure-play with firepower—macro's your ammo, backlog's your barrel, fundamentals the trigger. I'd slot 4-6% allocation for Monday, hedged with USD calls against tariff tweets. Building a Korea cyclicals sleeve? Layer in Doosan Enerbility for nuclear beta. Sizing thoughts?