April 19, 2024

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[THE INVESTOR] Korea Aerospace Industries’ uncertainties have expanded from changes in accounting standards and delay in its Iraqi project, said Shinhan Financial Investment on Jan. 2, maintaining a “neutral” recommendation. 

The company announced that it is renegotiating a contract for exporting trainer jets to Iraq, worth over 1.1 trillion won (US$1.03 billion), and that its supply of Surion-based aircrafts and firefighting helicopters, worth combined 2 trillion won, is being delayed. 

It also reported that its fourth-quarter earnings have been adjusted to 449.1 billion won revenue and 26.7 billion won operating profit, down 29 percent and 46.3 percent on-year, widely missing market consensus, pointed out analyst Hwang Eo-yeon. 

It will return to black this year, however, with 2.7 trillion won revenue, up 30.8 percent from last year, and 215.7 billion won operating profit, estimated the analyst. 

Its price-earnings ratio is at 29.9 times, over 50 percent discounted than its global peers, and recommends “hold” rating until uncertainties are cleared in the first half of this year, said Hwang. 

It has secured long-term growth momentum by winning MRO business, and growth potential including KF-X and LAH as well as the possibility of winning advanced trainer jet order from US Air Force, are positive, added the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)