[Edaily Reporter Kim Kyung-eun ] On the 21st, KIWOOM Securities projected that KOREA AEROSPACE INDUSTRIES(047810)’s second-quarter operating profit would come in at 62.6 billion won, falling significantly short of market expectations. However, the firm maintained its “Buy” rating and target price of 230,000 won, noting that earnings are expected to improve in the second half of the year.

Lee Han-gyeol, an analyst at KIWOOM Securities, stated in a report released that day, “Considering this year’s major delivery schedule for Ansan, we believe that revenue growth and profit improvement will accelerate in the second half of the year,” adding, “Since the schedules for key order projects are also concentrated in the second half, we expect the company to achieve its annual order target.”

KOREA AEROSPACE INDUSTRIES’ second-quarter revenue is estimated at 1.1439 trillion won, a 38.1% increase year-over-year. However, operating profit is projected to decline by 26.5% year-over-year to 62.6 billion won, falling significantly short of market expectations.

The analyst noted, “In the rotary-wing division, supply disruptions appear to have occurred due to defects in key LAH components,” adding, “Since the company is expected to fulfill only about 20% of its scheduled delivery volume for this quarter, a decline in revenue and profit is inevitable.”

He continued, “We believe the continued weakening of the Korean won also had a negative impact on profitability,” adding, “We estimate that profitability deteriorated as the overall projected cost of the finished aircraft export segment increased due to rising costs of imported parts.”

However, the analyst projected that the aircraft components business segment would continue to see robust sales growth and improved profitability.

The analyst explained, “KOREA AEROSPACE INDUSTRIES has set this year’s order target for finished aircraft exports at approximately 6.5 trillion won,” adding, “Discussions are underway regarding exports to Indonesia and the KF-21, which are key business areas for the finished aircraft export sector this year.”

He added, “It is understood that Indonesia is pursuing the acquisition of 16 KF-21s,” and noted, “Given the scale of the domestic mass production contract for the KF-21, if an export contract for the KF-21 is signed with Indonesia, it is highly likely to be a project worth trillions of won.”

He noted, “In addition, the Surion export project to the Middle East is underway, so this is a critical time to monitor whether we will achieve our order targets for finished aircraft exports in the second half of the year,” and predicted, “In the domestic business sector, we expect to secure an order for the LAH follow-on mass production project, valued at approximately 1.5 trillion won, during the second half of the year.”

Furthermore, he emphasized, “As the number of countries interested in acquiring the KF-21 increases, we expect the pipeline of orders for finished aircraft to expand,” adding, “Countries, particularly in Southeast Asia and the Middle East, are expressing interest in acquiring the KF-21 Block II or participating in 6th-generation fighter development projects. It is important to keep an eye on developments following the additional weapons testing for the KF-21 scheduled for the second half of this year.”