[Click eStock] Daishin "Korea Aerospace Industries, Earnings Pressure Continues"... Target Price 'Downgraded'

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 10th that it has lowered the target price for Korea Aerospace Industries from the previous 40,000 KRW to 36,000 KRW, citing continued difficulties in exporting aircraft parts and complete aircraft due to the impact of COVID-19.

Lee Dong-heon, a researcher at Daishin Securities, said, "Korea Aerospace Industries is the main domestic player in space-related businesses and a next-generation medium-sized satellite manufacturer. It is scheduled to develop core technologies for PAV (Personal Air Vehicle) and UAM (Urban Air Mobility). From a mid- to long-term perspective, it holds the position as the only domestic complete aircraft manufacturer," but added, "Although there are variables such as space momentum and recovery of the aerospace manufacturing industry, performance pressure is expected to continue in the first half of the year."

Korea Aerospace Industries' sales in the first quarter of this year fell 26% year-on-year to 611.7 billion KRW, and operating profit dropped 87% to 8.4 billion KRW. Compared to market expectations, sales were 7% below and operating profit was 57% below, resulting in an 'earnings shock.' The decline reflects a 40% plunge in complete aircraft export sales to 99 billion KRW year-on-year, reducing the backlog to 333.6 billion KRW, as well as a 58% decrease in aircraft parts sales to 102 billion KRW due to the impact of COVID-19.

The operating profit decline is analyzed to be due to a drop in profit margins caused by decreased sales, with no special one-time factors. This year, 373 billion KRW in one-time gains are expected to be reflected in sales and operating profit due to the Suri-on lawsuit victory.