[Click eStock] Expectation of KAI Order Expansion Due to Increased Defense Capability Demand... Target Price Up

[Asia Economy Reporter Myunghwan Lee] IBK Investment & Securities announced on the 23rd that it expects an increase in orders for Korea Aerospace Industries (KAI) due to the demand for defense capability enhancement from major countries, and raised the target price from the previous 41,000 KRW to 50,000 KRW. The investment rating was maintained as Buy.

IBK Securities forecasts KAI's sales and operating profit for this year to be 2.94 trillion KRW and 37.5 billion KRW, respectively. Compared to the same period last year, sales are expected to increase by 15% and operating profit by 136%. The operating profit margin is projected at 4.7%. This analysis reflects expectations of improvement in the finished aircraft export and airframe parts sectors. In the finished aircraft segment, performance improvement is expected driven by follow-up projects in Iraq and exports of T-50 advanced trainers to Indonesia and Thailand. The airframe parts sector is also expected to recover due to reopening.

With the recent rapid changes in international affairs, the demand for defense capability enhancement by major countries is increasing, which is seen as a positive factor. IBK Securities researcher Lee Sang-hyun analyzed, "Due to Russia's invasion of Ukraine and the attack on Saudi oil facilities by Yemeni rebels, the need for defense capability enhancement among major countries is expanding, and orders for cost-effective Korean defense companies are expected to increase." IBK Securities expects KAI's new orders to expand from 2.8 trillion KRW last year to 4.1 trillion KRW this year. The order backlog is also expected to increase to 19.8 trillion KRW this year from 18.6 trillion KRW last year.

Collaboration for orders of about 100 to 400 units, including tactical aircraft for the U.S. Air Force and training and tactical aircraft for the U.S. Navy with American defense contractor Lockheed Martin, is also expected to proceed. IBK Securities also anticipates progress in orders for the FA-50 light attack aircraft to Malaysia and Senegal, which have been delayed so far. Following the Korea-UAE defense ministers' meeting to strengthen defense industry cooperation on the 18th, the visit to KAI to tour development sites related to the T-50, Light Armed Helicopter (LAH), and KF-21 (Korean fighter jet) has raised expectations for additional orders, which is also encouraging.

Researcher Lee forecasted, "With the expansion of orders due to the defense capability enhancement of major countries, both performance and stock price are expected to level up in the mid to long term."

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