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Contracts signed with the City of Istanbul in 2016 were delayed by almost 7 years
I rewrote the contract, but cut it in half… The outlook for the defense sector is bright
The electric car project that won about 360 billion, won by Turkey’s Hyundai Rotem seven years ago, has been halved and is being promoted again.
According to the Electronic Disclosure System of the Financial Supervision Service on the 18th, Hyundai Rotem corrected and disclosed the contract size for the supply of Turkiye trains from KRW 359 billion to KRW 172.3 billion the previous day. This is a figure calculated based on the won-euro exchange rate (1281.19 won per 1 euro) at the time of the contract approximately 7 years ago. Given the exchange rate that has risen in the meantime (about 1,451 won as of May 16), actual sales based on earnings are expected to fall further.
The project is an order contract signed by Hyundai Rotem with the City of Istanbul in April 2016. At the time, it drew attention because it accounted for 10.8% of Hyundai Rotem’s annual sales. The intention was to supply electric vehicles by April 2021.
However, the project was not carried out as there were continuous delays in the introduction of new trains in Istanbul. When the original order contract expired on April 21, 2021, Hyundai Rotem said in a corrected disclosure that it did not specify the end date of the contract, saying, “We are discussing with the Turkish client regarding changes to the contract, such as the delivery schedule. ” The project has been postponed indefinitely.
Fortunately, it was possible to proceed with the project by recently re-signing an agreement with Turkey, but the size of the project was significantly reduced to less than half. The end date of the contract is June 2026. An official from Hyundai Rotem said, “It seems that there has been a debate about whether or not to conduct the business locally.” He added, “It is a business that has not been reflected in the current sales because the supply has not yet been made.”
The rail solutions sector, including electric vehicles, is the leading business accounting for more than half of Hyundai Rotem’s annual sales. In the case of last year, 1.779 trillion won, or about 56% of the total annual sales (3.163 trillion won), from the rail solutions sector. As the size of the Turkiye train project is considerably smaller than originally planned, it is expected to have some impact. On this day, Hyundai Rotem shares closed at 31,150 won, down 5.45% from the previous trading day.
However, looking at the sales growth trend, the medium to long term outlook is bright as the defense (defence) sector with the K2 tank is attracting attention. Lee Sang-hyeon, a researcher at Hi Investment & Securities, said, “K2 Electronics’ overseas orders are expected to increase significantly, and sales growth is expected to accelerate.”
Reporter Son Seon-hee sheeson@asiae.co.kr
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