1. Hwasung Valve H1 2025 Performance: Revenue Growth vs. Profitability Decline

Hwasung Valve reported revenue of KRW 21.7 billion in H1 2025, exceeding market expectations of KRW 18.8 billion by 15%. However, operating profit and net income fell significantly short of expectations, reaching KRW 3 billion and KRW 1 billion respectively, highlighting a significant profitability challenge.

2. Analyzing the Profitability Decline: Rising Costs and Market Competition

The decline in profitability despite revenue growth is likely attributed to factors such as rising raw material prices, fixed cost burdens, and increased competition. The rising cost of raw materials coupled with difficulties in raising selling prices appears to be a major contributing factor.

3. Opportunities and Risks: Growth Potential vs. Uncertainty

  • Opportunities: Strong market position, technological competitiveness, and efforts to secure new growth engines (hydrogen valves).
  • Risks: Inventory burden, volatility in raw material prices and exchange rates, uncertainty surrounding new businesses, and the rising interest rate environment.

4. Investor Action Plan: A Cautious Approach and Focus on Profitability Improvement

In the short term, Hwasung Valve’s stock price is likely to face downward pressure. Investors should closely monitor the company’s execution of its profitability improvement strategies, including cost reduction, SG&A efficiency improvements, and strengthening its high-profit product portfolio.