[Click eStock] "KotsTech, K2 Tank and Other Domestic Defense Companies Benefit from Order Expansion"

Hana Securities forecasted on the 21st that COTS Technology, a defense system company, will show a rapid trend of performance improvement due to consecutive orders from domestic defense companies.

COTS Technology is a defense embedded system company established in 1999. Despite the fact that overseas companies occupy most of the market, it has succeeded in developing more than 50 defense embedded systems, achieving localization and internalization.

Compared to global competitors, it has superior performance and price competitiveness, supplying more than 18 systems to the K2 tank produced by Hyundai Rotem and more than 4 systems to the Cheongung II of LIG Nex1. The sales ratio is estimated to be 50% from LIG Nex1, 18% from Hyundai Rotem, 15% from Hanwha Systems, and 17% from other defense companies.

As orders from domestic defense companies increase, the demand for COTS Technology’s systems is expected to grow rapidly.

Seongho Kim, an analyst at Hana Securities, said, "COTS Technology supplied 18 systems to the K2 over two years from 2022 to 2023, and plans to deliver the remaining quantity out of a total of 180 units by next year," adding, "As the delivery of existing order quantities increases, it will continue to recognize performance related to the K2."

Analyst Kim also said, "There is a high possibility that Hyundai Rotem will sign the second execution plan within this year to supply 180 units of the K2 tank to Poland," and "A supply contract for Romania, expected to be around 250 to 300 units, is also being pursued, so new system orders will increase."

He added, "The fourth domestic mass production project of the K2 led by the Defense Acquisition Program Administration will also act as an order momentum for COTS Technology," and "There may also be system supply orders for the Cheongung II that LIG Nex1 plans to export to Saudi Arabia."

He continued, "In June, production capacity (CAPA) was expanded from 60 billion KRW to around 80 to 90 billion KRW, which will speed up the response to orders," and added, "Additional expansions may proceed depending on the speed of securing new and existing orders."