KAI brokers retain Buy ratings despite cuts and third-quarter order gap

SK Securities retained its Buy rating on Korea Aerospace Industries (KAI) in its Nov. 4 report, while cutting its price target by 21.1% to 150,000 won from 190,000 won. The brokerage pointed to delivery growth in 2027–2028 and prospective year-end orders.

The near-term hurdle is the order target. Based on bookings through the third quarter, Eugene Investment & Securities estimated in its Nov. 4 report that KAI was about 8.2 trillion won short of its 10.4 trillion won annual goal. That represents roughly 79% of the target, rather than an updated shortfall as of Nov. 10.

Shares closed at 101,200 won on Nov. 10, up 2.22%.

What do the sampled targets show?

This review covers the ten Nov. 4 KAI reports included in the research dataset supplied for this article. It does not claim to cover every report published that day. All ten carry Buy ratings, with targets ranging from 135,000 to 186,000 won.

The sample’s mean target of 162,000 won implies 60.1% upside from the Nov. 10 close. Its median target of 161,500 won implies 59.6%. These are sample statistics, not a market-wide consensus.

Brokerage	Date	Rating	Target Price
DS Investment & Securities	Nov. 4	Buy	186,000 won
Kiwoom Securities	Nov. 4	Buy	185,000 won
Yuanta Securities Korea	Nov. 4	Buy	182,000 won
Daishin Securities	Nov. 4	Buy	173,000 won
Mirae Asset Securities	Nov. 4	Buy	173,000 won
Hanwha Investment & Securities	Nov. 4	Buy	150,000 won
SK Securities	Nov. 4	Buy	150,000 won
Eugene Investment & Securities	Nov. 4	Buy	146,000 won
Shinhan Securities	Nov. 4	Buy	140,000 won
iM Securities	Nov. 4	Buy	135,000 won

Target levels and revisions tell different stories. Eugene’s report described its 146,000 won target as unchanged. By contrast, iM Securities cut its target to 135,000 won in its Nov. 4 report, citing lower valuations at its benchmark companies.

Do valuation benchmarks tell the same story?

The reports used different earnings horizons. Eugene put KAI at 24.2 times consensus 12-month forward earnings.

On a 36-month forward basis, Daishin Securities calculated 20.3 times earnings for KAI against a global peer average of 18.0 times in its Nov. 4 report. Its target valuation used projected 2028 profit attributable to controlling shareholders. These report-date ratios use different earnings periods and are not calculations based on the Nov. 10 close.

What could limit fourth-quarter earnings?

Third-quarter revenue rose 51.6% year on year to 1.0643 trillion won, while operating profit increased 31.9% from a year earlier to 79.4 billion won. The operating margin was about 7.5%. According to SK, exchange-rate adjustments to estimated costs added about 40 billion won to operating profit, while one-off provisions reduced it by about 30 billion won.

Orders and deliveries present separate challenges. In Eugene’s breakdown of the third-quarter-based order gap, a third production contract for light armed helicopters (LAH) accounted for about 3 trillion won and remaining airframe work for about 0.4 trillion won. That left about 4.8 trillion won to be filled by aircraft exports and other deals. These were prospective orders, not signed contracts closing the gap.

For deliveries, iM projected a shortfall of about 20 LAH against the annual plan of 30. Seven were delivered in the first half; following a November restart, its analysts expected only two to three more by year-end.

The brokerage’s narrative projected annual revenue 400–500 billion won below KAI’s 5.7 trillion won guidance. However, its detailed annual forecast of 5.0763 trillion won implies a larger shortfall of 623.7 billion won. The prose and table therefore give different estimates of the revenue shortfall. Its analysts assessed that the engine defect appeared not to be attributable to KAI and did not expect late-delivery penalties.

Costs could also limit the benefit of higher deliveries. Yuanta Securities Korea identified further provisions on Iraqi receivables and in-house development spending as risks in its Nov. 4 report. It put that spending at up to 100 billion won in the fourth quarter, compared with 60 billion won in the first nine months.