[Click eStock] "Korea Aerospace Industries, Significant Improvement in Operating Profit This Year"

[Asia Economy Reporter Son Sun-hee] Kiwoom Securities announced on the 13th that it expects medium- to long-term earnings growth for Korea Aerospace Industries (KAI) and maintains a 'Buy' investment rating with a target price of 65,000 KRW.

KAI's sales in the fourth quarter of last year were 802.4 billion KRW, a slight improvement of 0.7% compared to the previous year, and operating profit is estimated to have turned positive at 37.9 billion KRW. This level is also in line with market expectations.

In particular, in the fourth quarter, KAI signed a 4 trillion KRW contract with Brazilian commercial aircraft manufacturer Embraer for the development of next-generation medium-sized commercial aircraft parts. Additionally, it secured new orders including the first mass production contract for 10 units of the LAH, as well as development projects for mine clearance helicopters and amphibious assault helicopter systems. As a result, the cumulative annual order volume reached 8.6 trillion KRW, exceeding the initial target order plan of 4.1 trillion KRW. Especially, the next-generation medium-sized commercial aircraft development contract with Embraer differs from the existing airframe parts supply contract in that it allows additional revenue recognition depending on the scale of mass production, which Kiwoom Securities expects to begin in earnest after 2027.

Researcher Lee Han-gyeol of Kiwoom Securities stated, "In 2023, a significant improvement in operating profit is expected, supported by the full-scale delivery of FA-50s to Poland and the recovery of airframe parts sales," adding, "The domestic business sector is also expected to show steady growth as the KF-21, mine clearance helicopter, amphibious assault helicopter system development projects, and the initial mass production of LAH proceed." Furthermore, he added, "Discussions on FA-50 exports are ongoing with countries such as Malaysia, Egypt, Slovakia, and the Philippines, so medium- to long-term earnings growth is expected to continue."