Hanwha Aerospace rises 2.7% despite Kospi's 5.8% plunge on US howitzer contract

Hanwha Aerospace closed more than 2 percent higher Wednesday even as the Kospi tumbled more than 5 percent, buoyed by expectations that its selection as the prototype supplier for the US Army's next-generation wheeled self-propelled howitzer program could lead to a large-scale follow-on contract.

According to Korea Exchange, Hanwha Aerospace ended Wednesday up 31,000 won ($22), or 2.71 percent, at 1.177 million won. The Kospi fell 398.66 points, or 5.80 percent, to close at 6,471.17. Hanwha Aerospace surged as much as 9.51 percent early in the session before giving back some of its gains.

The US Army announced Tuesday that it had signed a prototype development contract for the Mobile Tactical Cannon with Hanwha Defense USA, the US subsidiary of Hanwha Aerospace.

The contract is valued at $100.3 million. Hanwha Aerospace will initially supply six prototypes and has secured an option to deliver an additional 12 units. The maximum contract value, including the option, is $262.9 million.

The program drew competition from global defense contractors including Germany's Rheinmetall, Britain's BAE Systems, Israel's Elbit Systems and US-based General Dynamics. The industry had widely expected multiple companies to be selected for a competitive evaluation, but Hanwha Aerospace was in effect chosen as the sole contractor.

Hanwha Aerospace proposed the K9MH (K9 Mobile Howitzer), which mounts the turret of the existing K9 self-propelled howitzer onto a truck-based platform. The prototypes will be evaluated for performance, reliability and maintainability in actual combat environments.

Analysts are focused less on the prototype contract itself than on the potential full program that could follow. The MTC program aims to replace the US Army's M777 155mm towed howitzer with a wheeled self-propelled system, with up to 498 units expected to be procured.

KB Securities projected that a main contract could be signed as early as the fourth quarter of US fiscal year 2027 — between July and September next year — pending field evaluations. "It is difficult to predict the exact size of the main contract given the absence of prior K9MH deals," said Jeong Dong-ik, an analyst at KB Securities, "but using the average selling price from Poland's second contract as a reference, the figure could reach around 10 trillion won, and when factoring in ammunition supply vehicles, follow-on logistics support and cost increases from local US production, it could potentially reach as much as 20 to 30 trillion won."

Yang Seung-yun, an analyst at Eugene Investment & Securities, said the contract's significance lies not in the near-term sales of up to 18 units but in Hanwha's entry into the US artillery industrial base. "The business structure could expand from one-time platform sales to recurring follow-on support and consumables revenue," he said. Yang named Hanwha Aerospace as his top pick in the defense sector.