Korean Aerospace Ind.'s shares soar on Poland export hopes

Korea Aerospace Industries Ltd. (KAI), South Korea’s military aircraft manufacturer, is emerging a winner in South Korea’s sagging stock market on growing expectations of its jet fighter exports to Poland.

Shares in KAI leapt 5.58% to close at 6,800 won on July 1, against a 1.17% decline in the broader Kospi market. Over the past three months, the stock has rallied 35.7%, bucking a 15.86% slide in the benchmark index during the same period.

Its share price gained fresh impetus after President Yoon Suk-yeol discussed an export deal for KAI's FA-50 training aircraft with Polish President Andrzej Duda on the sidelines of the NATO Summit in Madrid last week.

South Korea’s arms sale to Poland was the main topic of their bilateral talks on June 29, according to Choi Sang-mok, senior presidential economic secretary.

Choi told reporters that Poland's Defense Minister Mariusz Blaszczak already inspected the weapon systems of KAI and other South Korean armament manufacturers of FA-50 fighters, K2 tanks and K19 howitzers, in South Korea last May.

“There will be progress to be made (on South Korea's FA-50 aircraft sale to Poland) sooner than later,” Choi said.

Polish defense minister and the country’s weapons procurement team are understood to have expressed their interest in purchasing dozens of FA-50 light fighter jets during their visit to KAI’s plant last May. In response, KAI recently launched a team dedicated to exports to Poland.

Poland is trying to fill its military gap left after it sent older Russian-made MiG-29 fighter jets to Ukraine in support of Ukraine in the war against Russia.

The NATO member shares its borders with Ukraine and Russia.

FOLLOW-ON PROJECTS WITH IRAQ

Back in 2013, KAI secured a $1.1 billion contract to sell T-50 supersonic advanced jet trainers to Iraq through February 2025.

Under the contract, KAI will offer follow-on support to Iraq’s Air Force for the next two decades, which will bring the total amount of its T-50 exports to Iraq to $2 billion.

For the after-sale support, KAI will begin providing repair services and management systems for logistics and military supplies to Iraq for another $360 million. It will become KAI’s first such service for a foreign customer.

The follow-on service is expected to improve the odds of KAI winning export deals from other countries, including Egypt and the United Arab Emirates, which has shown interest in KAI’s T-50 family of fighter jet trainers.

The T-50 model was co-developed by KAI and Lockheed Martin in a 2 trillion won ($1.5 billion) project between 1997 and 2006. It has sold more than 200 units in five countries, including South Korea.

The positive export outlook pushed brokerage companies to revise their forecasts for KAI’s 2022 earnings upward. The consensus estimate is that KAI’s operating profit is expected to nearly treble on-year to 165.9 billion won, with sales up 16% to 3 trillion won. 

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article.