S&P Global Ratings on Monday placed an A- long-term issuer credit rating on South Korea-based Hanwha Aerospace (KRX:012450).
The rating agency expects the defense contractor and shipbuilder to gain from the expansion of global defense spending, given its strong position in land systems.
The company's EBITDA growth will stem from solid growth in high-margin exports, which picked up following the Russia-Ukraine war and were boosted by orders from several European and Middle East nations.
Competitive pricing, fast delivery capacity, tested deployment history, and interoperability with North Atlantic Treaty Organization standards support the company's overseas market advantages, according to S&P.
However, the main risks come from a cyclical shipbuilding sector, the company's aggressive investment efforts, and execution risks from offshore expansion.
S&P views a moderately high possibility of extraordinary government support for the company due to its crucial role and strong linkages with the Korean government.
The outlook is stable, given S&P's belief that the company's solid order backlog will result in stable revenue and EBITDA over the next two years, anchoring higher capital expenditure and investment plans.
The company's order backlog increased to 37.2 trillion won, or equivalent to 4.6 years of revenue, last year from 19.9 trillion won in 2022.
Material changes in the company's investment plans, profit and cash flow generation, role and link to the government, or business competitiveness could prompt future rating actions.