Hyundai Rotem: Surging Growth of Defense Exports

• We remain impressed with Hyundai Rotem's aggressive new orders for defense and railway systems.

• Defense exports as a percentage of total sales increased from 0% in 2021 to 6.1% in 2022, 19% in 2023, and 36.4% in 2024.

• Hyundai Rotem had an order backlog of 14.1 trillion won at the end of 2024. Order backlog/sales ratio was 3.2x in 2024.

Conclusion First

We remain impressed with Hyundai Rotem's aggressive new orders for defense and railway systems.

Hyundai Rotem had an order backlog of 14.1 trillion won at the end of 2024. Order backlog/sales ratio was 3.2x in 2024. Defense exports surged from zero in 2021 to 0.7 trillion won in 2023, and 1.6 trillion won in 2024. Defense exports as a percentage of total sales increased from 0% in 2021 to 6.1% in 2022, 19% in 2023, and 36.4% in 2024.

Hyundai Rotem also has reasonable valuations. It is trading at EV/EBITDA of 11.6x in 2025 which is 19% discount to its three year historical valuations from 2021 to 2024.

Hyundai Rotem Company Background

Hyundai Rotem, a key subsidiary of Hyundai Motor Group, is one of the key players in Korea's defense and transportation sectors. Established in 1999 through the merger of various business units of Hyundai Precision Industry, Daewoo Heavy Industries, and Hanjin Heavy Industries, the company has evolved into a global manufacturer of railway vehicles, defense systems, and plant equipment. The company adopted the name Hyundai Rotem in 2007 to reflect its integration into the Hyundai Motor Group. The company's shares were listed on the Korea Exchange in October 2013.

Hyundai Rotem's operations are categorized into three primary sectors:

1) Railway Systems: Hyundai Rotem provides various types of railway vehicles, including EMUs, high speed trains, LRVs, DMUs, locomotives, and passenger coaches and freight wagons to 38 countries across the world. It has localized the core electrical equipment of railway vehicles including train control management systems (TCMS), traction motors, propulsion systems, and auxiliary power units.

In addition to producing railway vehicles, Hyundai Rotem is also involved in E&M (Electrical & Mechanical) and O&M (Operation & Maintenance). The Rail Solution Division has been supplying various types of electric trains, high-speed trains, light rails, diesel trains, locomotives, and passenger/cargo cars, propulsion control devices, and auxiliary power devices.

Hyundai Rotem has been instrumental in advancing South Korea's railway infrastructure. Notably, it supplied the majority of rolling stock for Korail, including the KTX high-speed trains, EMUs, and electric locomotives. The company also provided trains for Seoul Metro, Busan Metro Lines, and the Shinbundang Line.​ In 2025, the company secured a contract worth approximately 2.2 trillion won (USD 1.5 billion) to supply double-deck electric trains to the Moroccan National Railways Office, marking the largest single order for a South Korean rolling stock manufacturer.​

Source: Hyundai Rotem

High speed train manufactured by Hyundai Rotem (Source: Hyundai Rotem)

2) Defense Solutions: The company supplies Korea's ground weapon systems and has actively provided ground weapon systems over the past 40 years. After the successful development of the K2 tank, the electrification project is being carried out in order to increase the core combat power of the ground forces after the K1A1 tank. Hyundai Rotem's defense division focuses on the development of armored vehicles. The K808 and K806 "White Tiger" wheeled armored personnel carriers are designed for rapid deployment and enhanced mobility.

Hyundai Rotem's main unmanned system product is the HR-SHERPA, a multi-purpose unmanned vehicle. HR-Sherpa is an electrified unmanned platform developed by Hyundai Rotem and can be operated with various equipment depending on tasks such as search, reconnaissance, distribution, and firepower support.

In addition, Hyundai Rotem is also strengthening its existing flagship product portfolio, such as tanks and armored vehicles, to target the global market in the future. K2 tanks are also targeting the global market through models optimized for consumers in line with the expansion of the market. The Middle East K2 tank has enhanced engine cooling performance so that it can be operated even in high-temperature environments.

Source: Hyundai Rotem

Hyundai Rotem's K2 tank (Source: Hyundai Rotem)