[Click eStock] "KSP, Growth Expected Next Year Following This Year"

Sangsangin Securities forecasted on the 27th that KSP will continue to show performance growth next year following this year.

KSP is a company engaged in the engine parts business and the forging and casting business. As of the third quarter of this year, the sales composition was 66% engine parts, 19% forging and casting, and 15% others. The third-quarter sales increased by 16% year-on-year to 19.7 billion KRW, and operating profit rose by 260% to 3.3 billion KRW.

Researcher Junho Lee of Sangsangin Securities explained, "The increase in order volume drove top-line growth, and the product mix and lead time of price contracts were the causes of the operating profit increase," adding, "The engine parts division and forging and casting division, which have good profit margins, increased their share by about 14% compared to the third quarter of last year."

He also said, "Price contracts are conducted once or twice a year, and the decided prices are usually applied the following year," adding, "In 2022, the price of nickel, a major raw material, surged and was reflected in the price, and that effect is currently materializing in 2023."

KSP's sales for this year are expected to increase by 23% to 78.5 billion KRW, and operating profit is forecasted to rise by 223% to 11.3 billion KRW. This reflects the overall improvement in selling prices this year. The proportion of price contracts signed last year has gradually increased from the first quarter of this year and is expected to be highest in the fourth quarter.

Furthermore, expectations for next year's performance are also high. Researcher Lee said, "The order backlog at the end of the third quarter was 57.9 billion KRW, showing an upward trend compared to the previous quarter, and plants 1 and 3 are currently being expanded," adding, "The production increase from the expansion is expected in the first half of next year."

He continued, "Due to the stabilization of nickel prices, the price contracts for this year, which will be reflected in 2024, may be lower than last year, but the increase in production capacity (CAPA) is expected to offset the price reduction," adding, "In addition, it is noteworthy that the market is currently formed in an oligopoly due to the performance deterioration of one of the companies in the large engine parts market."