[Click e-Stock] "Ukraine War Butterfly Effect"... Korea Aerospace Industries, Target Price Up

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Daol Investment & Securities announced on the 7th that it has raised its earnings forecast for Korea Aerospace Industries (KAI) this year, reflecting a first-quarter earnings surprise driven by airframe parts, and increased the target stock price from the previous 63,000 KRW to 69,000 KRW. However, given the significant rise in the stock price so far, the investment rating was downgraded from 'strong buy' to 'buy.'

Choi Kang-sik, a researcher at Daol Investment & Securities, said, "Korea Aerospace Industries delivered an earnings surprise in the first quarter due to a recovery in airframe parts. Supply contracts for the FA-50 (a domestically developed multipurpose light combat aircraft by KAI) with Malaysia and Colombia are underway, and negotiations with Poland stemming from the Ukraine crisis have also been reported." He added, "We recommend long-term investment, anticipating momentum from complete aircraft exports and a turnaround in airframe parts performance."

The company’s first-quarter airframe parts sales reached 177.7 billion KRW, significantly exceeding the forecast of 62 billion KRW. The company is recovering faster than its own expectations at the end of last year.

There is also a forecast that this year’s complete aircraft export contracts could exceed 4 trillion KRW. Currently, 180 billion KRW has been ordered, assuming the completion of FA-50 supply contracts for Malaysia’s light combat aircraft project (18 units, 1.1 trillion KRW), Colombia (20 units, 700 billion KRW), and Poland (48 units, over 2 trillion KRW).

Researcher Choi said, "Poland is particularly significant as it is a butterfly effect of the Ukraine-Russia war," adding, "Poland has donated MiG-29s to Ukraine in urgent need and is considering purchasing the latest fighter jets to fill the power gap." He continued, "If all three projects are confirmed, the year-end backlog will reach 5 trillion KRW, and record sales exceeding 1 trillion KRW can be expected in 2024," adding, "Next year, training aircraft projects with the United Arab Emirates (UAE, 3.5 trillion KRW) and the United States are also pending."