[Tlik e-Sports] "Additional Growth Expected Through Securing Overseas Orders"

Hana Securities analyzed on the 14th that Contec has a high possibility of additional orders in the future through securing overseas orders. No investment opinion or target price was presented.

On the 7th of this month, Contec signed a single sales supply contract related to the overseas ground station (radome) construction project. The scale is 12.6 billion KRW, which amounts to 79.65% of last year's sales.

Seongho Kim, a researcher at Hana Securities, stated, "A radome refers to a structural enclosure that protects the antenna installed in the ground station, and since performance recognition is based on the progress of construction, it is expected to be fully reflected in the 2025 performance." He evaluated, "This contract signing is significant as it secured orders from overseas clients through Contec's competitiveness in turnkey supply of ground station system engineering solutions." He added, "If additional overseas orders continue in the future, it is expected to be a large-scale overseas market entry compared to domestic, so the contract amount and profitability are expected to be positive."

However, the GSaaS network solution business is expected to have a slightly longer timeline than the initial expectations at the beginning of the year. He said, "Currently, there are a total of 10 global proprietary ground stations, but among them, only about six, including Alaska and Jeju Island, generate meaningful performance." He forecasted, "The plan to build five additional ground stations is likely to be postponed to 2025, so next year, the existing ground stations are expected to be normalized and additional construction will take place."

He noted, "A positive aspect is the promotion of antenna self-production through the U.S. corporation established in April this year." He evaluated, "There are ongoing cost increases and supply issues related to antennas, which are raw materials used in ground station construction, but Contec is pushing for antenna mass production in 2025 through the U.S. corporation, and if realized, partial cost reduction is expected."

Along with this, the effect of acquiring AP Satellite is also expected to appear in the second half of the year. He said, "Synergies are expected through the combination of upstream (satellite manufacturing and launch) and downstream (ground station, data management) businesses within the space industry through the acquisition." He added, "The acquisition effect is expected to be partially reflected in the performance from the third quarter." He explained, "Although Contec and AP Satellite's business characteristics are influenced by government-led drives, since they have established a value chain within the space industry, it is judged that related benefits can be maintained in the future."

Contec recorded sales of 14.2 billion KRW and an operating loss of 7.2 billion KRW in the first half of this year. He said, "The reason for the expanded sales growth compared to the same period last year is due to the reflection of existing order backlog performance and the effect of expanding ground station construction services." He added, "Although the deficit in the GSaaS network solution business is expected to continue for the time being, high profitability is expected once the business division reaches BEP." He emphasized, "The second half of this year is a period when performance reflection is concentrated compared to the first half due to the nature of the industry, and since the effect of acquiring AP Satellite will begin to be reflected, the future performance improvement trend should be monitored."