Hana Securities said on the 26th that Korea Aerospace Industries (KAI) is expected to see operating profit expand as domestic mass production of the KF-21 gets into full swing. It maintained a Buy rating and raised the target price to 230,000 won from 210,000 won. The previous trading day's closing price of Korea Aerospace Industries (KAI) was 185,000 won.
Chae Un-saem, an analyst at Hana Securities, said, "Export performance of the KF-21 will act as a key variable that determines the duration of Korea Aerospace Industries (KAI)'s current upcycle," adding, "Given the domestic business, the backlog of complete aircraft orders, and additional domestic KF-21 orders to be secured going forward, the uptrend in operating profit through 2028 is not expected to face major issues."
Hana Securities projected that mass production revenue from the KF-21 will gradually expand each year from the third quarter of this year through 2028. It estimated annual production volumes at the mid- to high-single digits this year, the mid- to high-10s in 2027, and the mid-20s in 2028. As the number of mass-produced units increases, the revenue contribution of the KF-21 is also expected to expand to 11.2% this year, 20.2% in 2027, and 29.8% in 2028.
Chae said, "To enhance visibility on earnings growth after 2028, relying only on domestic volumes has limits, and export orders for the KF-21 will be essential," adding, "In the near term, we expect order wins mainly from countries with existing references for complete-aircraft exports."
The potential export demand for the KF-21 is currently estimated at a total of 573 to 703 units. In addition, although the United Arab Emirates (UAE) does not have direct references for complete-aircraft exports, the signing of a recent memorandum of understanding (MOU) on defense cooperation with the Korean government was analyzed to have increased the likelihood of KF-21 exports.
Hana Securities applied a target price-earnings ratio (PER) of 50 times to Korea Aerospace Industries (KAI)'s 12-month forward earnings per share (EPS). However, it explained that the target PER is a figure that could weigh on investors, as it is higher than the PERs assigned to defense corporations in Korea, the United States, and Europe.
Regarding this, Chae said, "A differentiator is that there are few major defense corporations that can match Korea Aerospace Industries (KAI)'s expected operating profit growth this year," adding, "Even during the 2011–2015 upcycle, there was multiple pressure in the early phase, but as steep earnings growth followed in the mid to late phase, PER pressure eased quickly."