[Click eStock] "Cots Technology, Benefiting from Increased Defense Exports"

On the 2nd, Korea Investment & Securities analyzed that COTS Technology is expected to benefit from increased defense exports.

COTS Technology is domesticating and mass-producing embedded systems for defense purposes. Major clients include LIG Nex1 (52%) and Hyundai Rotem (18%). Notably, their systems are installed in LIG Nex1's Cheongung-II and Hyundai Rotem's K2 tank, directly benefiting from the increased exports of these weapon systems.

Jang Nam-hyun, a researcher at Korea Investment & Securities, stated in a report on the same day, “COTS Technology holds both short-term and mid-to-long-term benefits amid the trend of increased exports of domestic weapon systems,” adding, “Since the export growth of domestic defense companies, which are clients, continues, the significant operating profit growth recorded last year is not a one-time event.”

Researcher Jang explained, “Looking ahead to the second half of the year, benefits from K2 tank exports will occur. Considering the proportion of embedded systems within the K2 tank, approximately KRW 81.9 billion in new orders is possible through the second contract with Poland and the export contract with Romania. This corresponds to 1.6 times last year's sales.”

He also projected, “In the mid-to-long term, exports of guided weapon systems will also increase. In the Middle East, in addition to Cheongung-II, there is continuous interest in domestically developed air defense missiles such as L-SAM and LAMD, so benefits from increased exports of guided weapon systems will continue in the mid-to-long term.”

Furthermore, he stated, “Localization of marine weapon system components will also drive mid-to-long-term growth,” adding, “The company already secured a development project for the weapon control system to be installed on the KDDX in 2022. Once the KDDX enters the mass production stage, this will lead to continuous sales.”