[Click eStock] "Korea Aerospace Industries Stumbles in Q3, But a Mid-to-Long-Term View Is Needed"

3Q Results Expected to Be Weak This Year... LAH Mass Production Postponed
U.S. Navy Trainer and Iraq Helicopter Orders to Increase Next Year

Korea Aerospace Industries is expected to post weak results for the third quarter of this year. However, some analysts say the company is well-suited for mid-to-long-term investment, given expectations for strong profit growth over the next two to three years.

On September 30, Daol Investment & Securities maintained its target price for Korea Aerospace Industries at 140,000 won and its "Buy" rating, citing these factors. The previous day's closing price was 108,800 won.

The company forecasts third-quarter sales of 866 billion won and operating profit of 66 billion won, down 4.5% and 13.5%, respectively, from the same period last year. This is a downward revision from previous estimates of 951 billion won in sales and 71.6 billion won in operating profit.

The outlook is attributed to the postponement of mass production for the domestically produced Light Armed Helicopter (LAH) and failure to meet the annual target (guidance) for the FA-50PL complete aircraft. Compared to leading defense companies that continue to report profit growth at the time of earnings releases, Korea Aerospace Industries is seen as less attractive.

However, the company is also considered to have strong potential for rapid profit growth over the next two to three years. In the domestic market, the number of LAH units is expected to increase to 13 in 2025 (11 in the second half) and 24 in 2026. While KF-21 system development spending will be halved to about 200 billion won next year, sales are expected to be concentrated in the second half, with one KF-21 deployed in the third quarter and seven in the fourth quarter of next year.

For complete aircraft exports, the design modification and testing of 36 FA-50PL units will be completed by the end of this year, with the pace of progress expected to accelerate from next year.

The order pipeline is also expected to expand. Starting next year, orders are projected to increase for at least 145 units of the U.S. Navy's next-generation advanced trainer (UJTS), 18 additional units for Malaysia, 36 plus 64 units for Egypt, and more than 30 Surion (KUH) helicopters for Iraq. Although there are variables such as delays in the UJTS airframe selection and Iraq's general elections, the company is expected to set a target of 10 trillion won in orders for 2026.

Choi Kwangsik, a researcher at Daol Investment & Securities, stated, "Since Korea Aerospace Industries' domestic and complete aircraft export growth will continue through 2027, it does not matter if orders are concentrated from the end of next year through 2027. Overseas markets are also likely to show strong interest in the deployment of the KF-21 Block 1 next year and the FA-50 single-seater, which will complete development next year."

On the 2nd, a model of Korea Aerospace Industries' KF21 fighter jet was displayed at the Korea International Defense Industry Exhibition held at Gyeryongdae, Chungnam. Photo by Kang Jinhyung aymsdream@

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