DS Investment & Securities on the 28th projected that Korea Aerospace Industries (KAI) will deliver four times more complete aircraft this year than last year. It initiated coverage with a Buy rating and a target price of 224,000 won. The previous session's closing price was 165,700 won.
Kim Tae-ho, an analyst at DS Investment & Securities, estimated that Korea Aerospace Industries (KAI) could deliver more than 60 complete aircraft this year. Accordingly, he forecast this year's revenue to grow 58.3% year over year to 5.8 trillion won and operating profit to rise 70.5% to 459 billion won.
With domestic mass production of the KF-21 and the Light Armed Helicopter (LAH) underway and KF-21 exports entering full swing, the target appears achievable given that deliveries already proceeded smoothly in the first quarter this year, including six domestic LAHs, two FA-50 repayment aircraft, and Indonesia's T-50.
Kim said, "In particular, the KF-21 is expected to have a higher profit margin than other domestic mass production programs, so profitability should improve steeply in the second half as deliveries ramp up," adding, "The key drivers of Korea Aerospace Industries (KAI)'s results and share price are KF-21 exports."
Kim assessed that clinching the first export contract is crucial, as about 3 trillion won of this year's 5.7 trillion won order guidance is estimated to come from Indonesia's KF-21 exports. Talks with Indonesia are understood to be in the final stage of the export contract, and because revenue is recognized by percentage of completion upon order intake, development revenue and the like could be reflected as early as the third quarter this year.
Kim said, "The United Arab Emirates (UAE) completely halted talks in April on the joint development of France's Rafale F5 fighter, so once the Middle East conflict ends, discussions on the joint development of the KF-21 Block 3 and the export of Block 1 and 2 complete aircraft are highly likely to gather pace," adding, "The potential for additional exports of the FA-50 and LAH to Southeast Asia and the Middle East also remains intact."