[Click eStock] "Kencoa Aerospace, Solid Order Performance and Optimism for Aerospace Industry Recovery"

[Asia Economy Reporter Eunmo Koo] NH Investment & Securities analyzed that although Kencoa Aerospace experienced a slowdown in growth and an expansion of losses this year due to the impact of the COVID-19 pandemic, the company continued to expand its order backlog by securing contracts for cargo aircraft conversion projects. They expect net profit generation in 2022 if the COVID-19 situation eases and sales normalize.

Kencoa Aerospace, the first Tesla requirement listed company in Korea, has seen a downturn in its aircraft materials and parts business due to the COVID-19 pandemic this year, which has been the main cause of poor performance. From 2013 to 2019, it recorded an average annual sales growth rate of 65%, but this year sales volume decreased by approximately 30%.

On the 21st, researcher Jinmyung Choi of NH Investment & Securities explained in a report, "Since the spread of COVID-19, the sales volume of aircraft manufacturers including Boeing has sharply declined, and the sales forecast of Spirit Aerosystems (a Boeing airframe parts supplier), our largest customer, also decreased by 56.2% compared to the previous year."

Despite poor sales performance, orders and order backlog remain in good condition. As of the end of 2019, the order backlog was about 590 billion KRW, and during the first half of the year, they secured a 262.9 billion KRW contract for converting passenger aircraft into cargo aircraft. Researcher Choi stated, "Despite the expanded losses this year, the company maintains sufficient business sustainability," and added, "Even without additional new orders, the order backlog is estimated to have expanded by more than 35% compared to the previous year, which corresponds to 24.4 times the sales forecast for this year."

With the expected distribution of COVID-19 vaccines mainly in the United States, Kencoa Aerospace is also expected to emerge as a beneficiary company. Researcher Choi evaluated, "Since Kencoa Aerospace's order backlog has also expanded, conditions are favorable for a rapid recovery in performance," and added, "If business normalization is confirmed next year, net profit generation is expected in 2022, and the increasing proportion of defense industry transactions is also expected to play a positive role in stabilizing profitability in the future."

This content was produced with the assistance of AI translation services.