1. STX Engine Q2 2025 Performance: Defense Sector Leads, Civilian Sector Lags

STX Engine reported KRW 213.6 billion in revenue for Q2 2025, a 12.76% increase year-over-year. Operating profit reached KRW 33.3 billion, and net income was KRW 29.7 billion, demonstrating robust growth. The defense sector (Special Business) was the primary driver, showing significant growth and accounting for 41.89% of total revenue, fueled by projects like the K9 self-propelled howitzer engine localization.

2. Positive Factors: Defense Growth and Future Tech Investment

  • K-Defense Momentum: The global expansion of K-Defense exports provides sustained growth potential for STX Engine’s defense business.
  • Eco-Friendly Engine Development: Investments in future technologies, including eco-friendly marine engines, contribute to long-term growth prospects.
  • Management Stability: The change in major shareholder raises expectations for improved management stability.

3. Negative Factors: Civilian Weakness and Financial Risks

  • Civilian Sector Struggles: Low operating rates (24.8%) and high financial costs hinder profitability improvements.
  • Financial Risks: High debt levels coupled with exchange rate and interest rate volatility pose threats to financial stability.
  • Bidding Restrictions: Restrictions on bidding participation until June 2026 could negatively impact short-term business activities.

4. Investment Strategy: Short-Term Risks vs. Long-Term Potential

STX Engine’s growth potential is fueled by its defense business and investment in future technologies. Investors should be aware of short-term risks, including bidding restrictions, exchange rate fluctuations, and rising interest rates. Key indicators for mid-to-long-term investment decisions include the success of eco-friendly engine development, securing additional defense contracts, and improvement in operating rates within the civilian sector.