South Korean Defense Stocks Surge to Valuations Far Above Global Peers

Stocks

Economic

Summary:

Shares of South Korea’s defense companies have soared between 70% and 300% in 2025, pushing valuations to multiples far exceeding those of US giant Lockheed Martin...

Rapid Price Gains Outpace Fundamentals

Hanwha Aerospace, LIG Nex1, Hyundai Rotem, Korea Aerospace Industries (KAI), and Hanwha Systems have all seen sharp share price increases this year, driven by optimism over rising global defense budgets and South Korea’s growing arms exports. The rally has lifted their price-to-earnings ratios (PER) well beyond historic norms, with Hanwha Systems at 61, LIG Nex1 at 44.1, KAI at 37.1, Hanwha Aerospace at 32.1, and Hyundai Rotem at 23.5. By comparison, Lockheed Martin’s PER is projected at 19.6 in 2025.

Even with forecasts for a slight pullback in 2026 Hanwha Systems at 38.5, LIG Nex1 at 33.9, KAI at 24.7, Hanwha Aerospace at 23.1, and Hyundai Rotem at 21.6 the multiples remain well above Lockheed Martin’s projected 14.7. A similar gap appears in EV/EBITDA ratios: LIG Nex1 stands at 28.5, Hanwha Systems at 27.6, KAI at 21.3, Hyundai Rotem at 19.3, and Hanwha Aerospace at 13, compared to 12.8 for Lockheed Martin. These figures indicate South Korean defense firms are trading at valuations significantly higher than their current earnings or cash flow would justify.

Earnings Growth and Market Risks

In Q2 2025, the combined operating profit of the four largest contractors Hanwha Aerospace, Hyundai Rotem, LIG Nex1, and KAI exceeded 1 trillion won (about USD 719 million) for the first time, supported by a surge in backlogged orders. However, much of the anticipated export revenue has yet to be converted into actual sales. This creates a correlation between current stock prices and future delivery performance; if revenues materialize slower than expected, the rapid run-up in share prices could reverse, leaving valuations exposed.

Analysts note that while the structural growth in defense demand supports long-term expansion, the present premium pricing embeds aggressive assumptions about contract execution and profit margins. The gap between market capitalization and realized earnings potential suggests that, without continued strong order fulfillment and sustained export momentum, South Korean defense stocks may struggle to maintain their elevated levels.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education