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Korea Aerospace Industries |
[Alpha Biz= Reporter Kim Minyoung] KB Securities has maintained its target price and investment recommendation for Korea Aerospace Industries (KAI), expecting strong performance in the second quarter of this year and an enhanced momentum in contract awards starting from the end of June.
On June 18th, KB Securities reiterated a target price of 65,000 KRW and a "Buy" investment rating for Korea Aerospace Industries in a report titled 'Forget the Neglected Past.'
According to KB Securities, they forecast that KAI will achieve solid second-quarter results with a projected 23.4% year-on-year increase in revenue to 904.7 billion KRW and a 572.5% surge in operating profit to 56.4 billion KRW compared to the same period last year. They mentioned that both revenue and operating profit are expected to align closely with consensus estimates, indicating a robust and smooth earnings season.
KB Securities highlighted that major defense stocks saw significant increases in June, such as LIG Nex1 (28.9%), Hyundai Rotem (18.5%), and Hanwha Aerospace (16.3%), averaging a 21.2% rise. In contrast, KAI only saw a modest 2.3% increase during the same period, suggesting it was largely overlooked in the defense stock rally.
The report explained that the disappointment stemmed from unrealized expectations during the visit of the UAE President (May 28-29), where anticipated contracts for Surion helicopters did not materialize. However, KB Securities clarified that these projects are still under negotiation and not lost contracts, hence premature disappointment is unwarranted.
Looking ahead, KB Securities noted that despite a sluggish performance in new orders amounting to 200 billion KRW in the first quarter, KAI signed an unexpected 1.3 trillion KRW UAM (Urban Air Mobility) component supply contract in April, pushing cumulative orders over 1.5 trillion KRW for the year. They anticipate stronger momentum in contract awards from late June onwards.
Additionally, KB Securities anticipates the signing of a significant KF-21 initial production contract for the Korean military worth around 1.5 trillion KRW this month and potential UAE Surion helicopter export contracts worth approximately 500 million USD in the third quarter.
Overall, KB Securities remains optimistic about Korea Aerospace Industries' prospects, emphasizing ongoing negotiations and upcoming contract awards as key drivers of growth and market sentiment.
AlphaBIZ Kim Minyoung(kimmy@alphabiz.co.kr)
