Heungkuk Securities said on the 24th that Korea Aerospace Industries (KAI) is expected to see its competitiveness stand out on sales growth through large-scale domestic mass-production programs and rising overseas exports. The firm kept its investment rating at "Buy" and raised its target price to 210,000 won. KAI closed the previous trading day at 175,600 won.
Last year, KAI's revenue rose 1.7% on-year to 3.699 trillion won, and operating profit increased 11.8% to 269.2 billion won. New orders climbed 30.4% to 6.395 trillion won on the start of initial mass production of the KF-21 and additional FA-50 orders from the Philippines.
Choi Jong-gyeong of Heungkuk Securities said, "Revenue was affected by delays in the delivery schedule for domestic finished aircraft and by adjustments to the timing of revenue recognition for some projects, such as the Poland FA-50 under the percentage-of-completion method, while orders reflect delays in exports of finished aircraft and in the airframe structures segment."
Choi said, "Despite a similar revenue trajectory, operating profit recovered to double-digit top-line growth and a margin in the 7% range, and orders, too, showed a clear turnaround, with the start of KF-21 mass production and the expansion of export programs, despite some delays versus targets."
KAI's results are expected to improve this year. Heungkuk Securities projected KAI's revenue and operating profit this year at 5.53 trillion won and 494.6 billion won. Revenue would be up 49.6% from a year earlier. New orders are forecast at 9.916 trillion won.
Choi said, "According to the annual qualitative outlook (guidance) on orders and revenue that KAI released in February, it is targeting 5.731 trillion won in revenue and 10.438 trillion won in orders, signaling strong growth."
He added, "With sales growth through large-scale domestic mass-production programs such as the KF-21 and LAH, and with higher progress in programs in Poland and Malaysia securing a growth base centered on exports of finished aircraft, its competitiveness is expected to stand out further as a 'defense exporter built on large-scale mass production.'"