[Edaily Reporter Shin Ha-yeon ] On the 30th, SKSecurities stated that while KOREA AEROSPACE INDUSTRIES(047810)’s second-quarter earnings fell significantly short of market expectations due to delays in the mass production of the LAH (Light Armed Helicopter) and one-time costs, it expects earnings to improve and order momentum to gain traction starting in the second half of the year. The firm maintained its “Buy” rating but lowered the target price from 230,000 won to 190,000 won.

Han Seung-han, an analyst at SKSecurities, stated, “The delay in LAH mass production is merely a matter of timing, and the momentum for earnings improvement and order intake remains intact,” adding, “Earnings growth is expected to continue starting in the second half of the year, driven by the normalization of the Mirion LAH project and expanded delivery volumes for the KF-21 and FA-50.”

Second-quarter consolidated revenue reached 1.1679 trillion won, a 41.0% increase year-over-year; however, operating profit fell 43.2% to 48.4 billion won, resulting in an “earnings shock” that fell significantly short of the market consensus (88.9 billion won).

Regarding this, an analyst explained, “Of the six Mir-On LAH helicopters scheduled for delivery as part of the mass production project, the delivery of five was delayed due to engine component defects, resulting in revenue and operating profit falling short of initial projections by 130 billion won and 18 billion won, respectively,” and "Additionally, one-time costs totaling 10 billion won were incurred, including a 10 billion won inventory valuation loss and a 9 billion won provision for bad debts related to the Iraq project," the analyst explained.

However, the company projected that momentum from large-scale order wins would continue in the second half of the year. One analyst noted, “While delays in securing orders for Middle Eastern projects due to the war in the region pose a challenge to achieving this year’s order target, it will be possible to secure orders totaling approximately 9 trillion won in the second half, including the KF-21 export to Indonesia and the third phase of domestic LAH mass production (108 units).”

The analyst continued, “Of the 30 LAH units scheduled for delivery this year, only 7 were delivered by the first half, so the delivery schedule for the remaining 23 units needs to be readjusted; however, this will merely delay the timing of revenue recognition,” adding “With the visibility of KF-21 export contracts increasing—starting with Indonesia this year and expanding to the Philippines, Saudi Arabia, and the United Arab Emirates (UAE) beginning next year—we expect the stock price to rise on the back of this order momentum,” he said.