1. Stock Price Trends Over the Last 5 Years
Kencoa Aerospace was listed on the KOSDAQ in March 2020 with an initial public offering (IPO) price of 10,000 KRW. On its first trading day, the stock initially surged above the IPO price but soon corrected to close around the opening level of approximately 11,500 KRW. Subsequently, in 2020 the stock experienced weakness amid the COVID-19 shock affecting the aviation industry. However, entering 2021, expectations for the aerospace sector helped the stock rebound. In fact, during the first half of 2021, the price rose from about 8,200 KRW at the start of the year to the 17,000 KRW range within six months – a remarkable increase of 112%.
In 2022, with the Russia–Ukraine war bringing the defense theme into focus, and as Kencoa announced its participation in Amazon’s satellite internet project “Project Kuiper,” the stock at one point surpassed 18,000 KRW. However, following a global market correction and earnings fluctuations, the stock experienced ups and downs, and between the end of 2022 and early 2023, it fell to the 8,000 KRW range during a corrective phase. Recently, from the end of 2024, fueled by increased defense and aerospace orders, the stock embarked on a sharp upward trend. In January 2025, it surged by 48% in just one month, resulting in an approximate annual gain of 19%. Currently (as of the end of February 2025), the stock trades in the 13,000 KRW range. Although it has entered a corrective phase following a sharp rise, the stock still shows strong momentum.
2. Company Performance Analysis
Kencoa Aerospace has shown consistent revenue growth over recent years; however, its profitability has been highly volatile. Consolidated revenue increased from 54.7 billion KRW in 2021 to 75.9 billion KRW in 2022, and reached 91.1 billion KRW in 2023 – demonstrating steady growth over the three-year period. Notably, in 2022, revenue increased by approximately 38.7% year-over-year, reflecting the post-COVID recovery. Operating profit swung from a loss of 13.8 billion KRW in 2021 to a turnaround with a profit of 8.0 billion KRW in 2022, but then sharply dropped to 900 million KRW in 2023. Similarly, net profit turned positive at 3.2 billion KRW in 2022 but reversed to a net loss of 1.8 billion KRW in 2023. This volatility in profitability is due to a combination of factors such as the capital-intensive nature of the aviation business, high R&D expenses, one-off costs, and the impact of exchange rate fluctuations.
Regarding financial stability, the debt-to-equity ratio has significantly improved. At the end of 2021, the consolidated debt-to-equity ratio was as high as 317%, falling to 240% in 2022 and further down to 157% in 2023. This improvement was driven by the turnaround to profitability in 2022, which increased shareholders’ equity, and by a large capital infusion in 2023 that boosted the total capital. In fact, the company issued convertible bonds (CB) worth approximately 130 billion KRW in 2024 to secure funds for operations and facility expansion; when these bonds convert into equity, the debt ratio is expected to improve even further. Overall, Kencoa exhibits clear revenue growth and a significant backlog of orders that should support steady revenue in the coming years, but its profitability remains weak and unstable, making profitability improvement a key challenge for the future.
3. Valuation Assessment
At the current price level, Kencoa Aerospace’s valuation might seem high when based solely on its recent earnings. For 2023, with net losses making the PER (Price-Earnings Ratio) not meaningful, the PBR (Price-to-Book Ratio) stands at approximately 3 times – which is higher than the average in the industry. In addition, the enterprise value relative to EBITDA (EV/EBITDA) for 2023 is around 38 times, which is considerably higher than the industry average of about 6 times or the overall market average. This indicates that the current stock price is largely reflecting its future growth potential. When looking at the price-to-sales (P/S ratio), Kencoa is trading at around 2.1 times its revenue, compared to the industry average of 1.7 times, suggesting that investors are expecting high revenue growth in the future.
However, considering future earnings prospects, the current valuation might not be excessively high. According to consensus estimates from securities firms, by 2025 the company is expected to achieve sales of 132 billion KRW, an operating profit of 12.2 billion KRW, and a net profit of 9.3 billion KRW, with improvements in operating margin and ROE reaching double digits. In this scenario, based on the expected EPS for 2025, the PER is projected to fall to around 15–16 times, which is not extreme for a growth stock. Moreover, the expected PBR by 2025 is anticipated to drop to the mid-2 range, and the EV/EBITDA is expected to improve significantly to just over 10 times. In summary, while the current stock price appears overvalued based on recent earnings, it lies between fair to undervalued when considering future earnings (based on the realization of its order backlog). Investors should closely monitor how this valuation gap is resolved – whether through earnings improvement or a stock price correction.
4. Comparison with Domestic and Global Competitors
Kencoa Aerospace produces aerospace components and structures and, compared with domestic peers, is smaller in scale yet specializes in niche markets. Major domestic competitors include large-scale companies such as Korea Aerospace Industries (KAI), which produces complete aircraft and military jets; Hanwha Aerospace, which deals with aircraft engines and space launch vehicles; and LIG Nex1, which is active in missile and defense electronics. These large companies, with market capitalizations in the trillions of KRW, deliver stable revenue and profits, so rather than being direct competitors, they are more like customer companies. In practice, Kencoa supplies components to major domestic aviation and defense companies such as KAI, Hanwha, and Korean Air.
In the global market, Kencoa’s position is that of a small-to-medium-sized supplier within the aerospace value chain. Its major customers include U.S. giants Boeing and Lockheed Martin, as well as NASA, which is a strength as it participates in world-class aviation and space programs. Internationally, many companies similar to Kencoa supply components to large OEMs, but Kencoa distinguishes itself by having production bases in both Korea and the United States, which grants it price competitiveness and the ability to respond quickly in local markets. For example, in the passenger-to-freighter (P2F/PTF) conversion business, it has secured an exclusive volume supply through strategic collaboration with Singapore’s ST Engineering. Additionally, by acquiring U.S. companies (such as M&J) and establishing production bases in the United States, Kencoa is directly involved in U.S. government and private space projects, thereby building a competitive edge in business diversification and establishing a global network relative to smaller component suppliers. However, due to limitations in economies of scale and capital power, maintaining reliability through production capacity expansion and quality control in the future, particularly during periods of increased orders, remains a challenge when competing with larger firms.
5. Outlook for the Aerospace & Defense Industry
The aerospace and defense industries are expected to grow globally over the coming years. In the defense sector, increasing national defense budgets and geopolitical tensions are driving steady demand. Since the outbreak of the Ukraine conflict in 2022, countries in the United States and Europe have significantly increased their defense spending, and Korea is also benefiting from expanded defense exports, suggesting a robust medium- to long-term demand for military aircraft, missiles, and reconnaissance satellites. In the civil aviation sector, after recovering from the COVID-19 pandemic, passenger demand is rebounding swiftly, leading to increased production by companies like Boeing and Airbus. In particular, the market for converting old passenger aircraft into freighters (PTF conversions) is expanding due to the growth of e-commerce. This trend is positive for companies like Kencoa, which are engaged in aircraft component manufacturing and MRO (maintenance, repair, and overhaul) services.
The space industry is emerging as a new growth driver. With private companies like SpaceX, as well as Amazon and Blue Origin, launching large satellite constellations for space-based internet services, competition in building satellite networks has intensified. Furthermore, various government-led projects – such as NASA’s Artemis lunar program and Mars exploration initiatives – are underway. The Korean government is also increasing its space development budget through the establishment of a dedicated aerospace agency and launching its own space vehicles, meaning that domestic companies could benefit from direct project participation or subsidies. In this macro trend, companies involved in the production of satellite launchers and spacecraft components, as well as those supplying advanced materials, are poised to capture explosive growth opportunities. Kencoa Aerospace, already involved in Amazon’s Kuiper project and having secured orders from NASA and U.S. defense agencies, is clearly positioned to benefit from this industry growth. The current order backlog is equivalent to 8–9 times its annual revenue, which is expected to support stable revenue growth for several years. Overall, the outlook for both defense and aerospace sectors is positive in the medium to long term, creating a favorable growth environment for Kencoa.
6. Consideration of External Variables (Exchange Rates, Interest Rates, Raw Materials, Global Economy)
Kencoa Aerospace’s performance and stock price are influenced by several external factors. Regarding exchange rates, a stronger US dollar generally benefits Kencoa, as a significant portion of its revenue comes from overseas transactions (especially with the United States), meaning that when the KRW weakens against the dollar, the revenue translated into KRW increases. In fact, the depreciation of the Korean won in 2022 likely allowed export companies, including Kencoa, to benefit from foreign exchange gains. However, if there are liabilities denominated in dollars, a stronger dollar could also lead to valuation losses, and as exchange rates stabilize after 2023, the exchange rate effect is expected to diminish. Overall, Kencoa has partially hedged itself naturally against exchange rate risk through its U.S.-based production.
Regarding interest rates, even though global tightening has driven up market interest rates, the direct impact on Kencoa is expected to be limited. As mentioned, the company has lowered its interest expense by utilizing funds through convertible bonds with a 0% coupon rate and other mezzanine financing. However, if additional funding is needed in a high interest rate environment, the cost of borrowing could increase, and a higher discount rate could lower the present value of future earnings.
The fluctuations in raw material prices also constitute an important factor. Aerospace component manufacturing uses special materials such as aluminum alloys and titanium; a sharp rise in raw material prices could pressure production costs and harm profitability. To mitigate this risk, Kencoa has taken steps such as securing its own material supply chain through its subsidiary, California Metal, to reduce costs and soften the impact of raw material price volatility.
Global economic conditions and geopolitical events cannot be ignored either. In the event of a global economic downturn, reduced demand for air travel and logistics might decrease orders for civil aviation components, and government defense budgets might be adjusted under fiscal pressure. Conversely, an overheated economy could lead to inflation, increasing labor and material costs. Additionally, geopolitical issues such as U.S.–China tensions or export restrictions can also affect the industry. Fortunately, since Kencoa’s main focus is on the defense and space sectors—areas with relatively inelastic demand—there is a built-in margin of safety. However, investors should continuously monitor exchange rates, interest rates, and raw material trends along with global economic developments, as these factors could affect Kencoa’s earnings outlook.
7. Supply/Demand Analysis (Investor Trends)
Kencoa Aerospace’s stock is characterized by a high free float – over 70% of shares are in circulation, which results in active trading primarily by retail investors. In fact, the foreign investor stake is just around 1%, meaning that foreign investment has little impact on the stock. Institutional investors also hold only a small portion of the stock, mainly through small- to mid-cap funds, so their ownership is not significant. As of the third quarter of 2024, Asset Plus Asset Management was the largest institutional investor with approximately 3.4% of shares (445,000 shares), followed by minor holdings from other asset management firms like Hanwha Asset Management. Due to the predominance of retail investors, the stock exhibits high short-term volatility, with rapid swings as thematic news can trigger quick profit-taking and subsequent sell-offs. However, recent inflows of institutional capital, such as from private equity funds, have begun to alter the shareholder structure. In 2024, convertible bonds totaling 130 billion KRW attracted investment from entities like IMM Investment, representing a strategic capital injection into Kencoa. Although this capital supports facility expansion and potential M&A, if these convertible bonds convert to equity, they could lead to a potential overhang that might exert selling pressure. However, given that the conversion price is set at 13,995 KRW – near the current stock price – unless the price rises significantly, the likelihood of early conversion for short-term profit-taking appears low. In summary, while the stock is currently dominated by retail investors, making it susceptible to sharp short-term moves, the recent inflow of institutional capital suggests that the overall supply and demand dynamics will ultimately be driven by underlying fundamentals and order news.
8. Impact of Government Policies and Regulations
Government policies and regulations have a significant influence on the business environment of Kencoa Aerospace. In the defense industry, the Korean government strategically supports defense companies, and as a supplier in the defense sector, Kencoa indirectly benefits from this support. For instance, if export volumes from companies like KAI increase as a result of government-led defense export initiatives, it is likely that additional orders will flow to component suppliers like Kencoa. Moreover, being designated as a defense contractor can bring benefits such as tax incentives, R&D support, and simplified export approval procedures.
On the aerospace side, the Korean government is pushing for the establishment of an aerospace agency and aims for a lunar landing in the 2030s, reflecting an intensified state-driven approach to space development. To nurture private space companies, the government is setting up funds and supporting technology development, which could potentially result in direct project participation or subsidies for companies like Kencoa that possess advanced material and component technologies.
Overseas, policies and regulations are also important. Kencoa, being closely linked to U.S. defense and space projects, must comply with U.S. government procurement policies. In the past, during the Trump administration, there were strong domestic production requirements (e.g., “Buy American” initiatives) that pressured companies to manufacture in the United States. Kencoa preemptively addressed these challenges by acquiring U.S. companies (such as M&J) and establishing local production bases, effectively adapting to these protectionist policies. Currently, policies such as the U.S. “Buy American” campaign and ITAR (International Traffic in Arms Regulations) remain relevant. Consequently, increasing its U.S. production share and securing local talent and technology is essential. Kencoa has already successfully implemented its localization strategy by participating in U.S. government space projects through its U.S. subsidiaries.
From a regulatory standpoint, complying with aerospace safety standards and obtaining quality certifications is crucial. Meeting certifications such as FAA and EASA for aircraft components and adhering to security regulations in the defense sector are necessary to maintain order books. Kencoa has historically met these standards by obtaining approvals from major vendors such as Boeing, Airbus, and NASA, thereby ensuring its reliability. Provided that there are no drastic regulatory changes, these certification statuses should continue. In fact, recent legislative initiatives such as the proposed “Aerospace Industry Special Act” further indicate a supportive regulatory environment for the industry.
9. Short-Term Stock Price Outlook (3 Months to 1 Year)
Over the next year, the short-term stock price movement is likely to be determined by the balance between a post-surge correction and the realization of earnings momentum. Firstly, given that 2024 earnings might remain weak due to factors such as facility expansion costs, there could be significant volatility during quarterly earnings announcements. According to analyst estimates, sales for 2024 are expected to grow modestly over the previous year, but operating profit may again register a loss due to capital expenditures. Indeed, during the first half of 2024, delays in recognizing revenue from major customers like Boeing contributed to a slower start. This could lead to a “breather” period in the first half of the year until earnings begin to improve.
However, expectations are that the situation will change in the second half of the year. With an order backlog at record levels and the completion of large-scale production capacity expansions planned from late 2024 to early 2025, revenue should begin to reflect these orders significantly. Starting from the 2025 earnings season, a rapid turnaround in earnings is anticipated, and historically, stock prices tend to price in earnings improvements 6–12 months in advance. Therefore, a strong upward momentum could develop from late 2024 to early 2025. In fact, with the improved valuation based on 2025 earnings estimates, some institutions have already begun to upgrade their ratings. For example, Daishin Securities has expressed confidence in future revenue growth based on an order backlog of approximately 850 billion KRW, citing stable order volumes and the expansion of its North American production line. Similarly, Yuanta Securities forecasted “a turnaround to profitability and rapid growth in 2025” and noted that the current stock price reflects a PER of 15.9 times based on 2025 estimates, which is considered undervalued relative to peers.
In the short term, events that could impact the stock include announcements of additional orders or favorable news regarding government projects. According to Yuanta Securities, there is potential to secure additional orders worth between 300 billion and 400 billion KRW in the first half of 2025, and such new contracts would likely serve as immediate positive catalysts. Conversely, risks include the potential realization of the convertible bond overhang (if the stock rises, triggering early conversion and subsequent share sales) or delays in earnings improvements. Particularly, if Kencoa fails to meet its expansion schedules by the end of 2024, short-term investor sentiment may weaken. Overall, however, given the clear pathway from increased orders to revenue and then to profit improvements, and barring any major unexpected events, the stock is expected to follow an upward trend over the next year. Even if a temporary correction follows a sharp rise, it is anticipated that the price will rebound in a stepwise fashion.
10. Long-Term Stock Price Outlook (3 Years or More)
From a long-term perspective (three years or more), attention should be given to Kencoa Aerospace’s growth potential. The current order backlog – approximately 850 billion KRW – has more than tripled compared to about 275 billion KRW in 2019, suggesting that the company has entered a high-growth trajectory. If the company achieves its target of reaching sales in the 130 billion KRW range and an operating profit in the vicinity of 10 billion KRW in 2025, then by 2026–2027, annual sales could potentially approach 200 billion KRW. The company’s stated mid- to long-term vision is to evolve from a specialized aerospace components manufacturer into a comprehensive aerospace solutions provider. Kencoa is already exploring new business opportunities beyond its existing operations, such as in urban air mobility (UAM/AAM), space launch vehicle materials/components, and satellite structures, and is making strategic investments in U.S. space startups to secure future growth engines. These moves indicate a strategy aimed at moving up the value chain, and if successful, could lead to a re-rating of the company’s value.
In the long term, the stock price will ultimately depend on the sustainability of earnings growth. Even if the current order backlog is gradually recognized as revenue, the high growth rate could be maintained for several years. Furthermore, if additional orders continue to accumulate, this growth durability will enhance the stock’s attractiveness. In such a scenario, Kencoa could evolve into a much larger company within three years, and the stock price would likely follow an upward trend. Some market commentators have even compared Kencoa’s potential upside to the dramatic 10-fold surge seen in stocks like Hyundai Electric. While this comparison is metaphorical, it does suggest that Kencoa has the potential to move from a small-cap to a mid-cap company.
Nevertheless, several risks must be considered over the long term. First, there is the risk of intensified competition. As the aerospace industry grows, new entrants may emerge, and major global companies might diversify their supplier base, potentially weakening Kencoa’s dominant position. Second, technological changes are a concern. The aerospace sector is characterized by rapid innovation, and failure to keep pace with advanced materials or manufacturing techniques could result in obsolescence. Kencoa must continue investing in R&D and quality improvements to counter these risks. Third, long-term trends in exchange rates, interest rates, or global geopolitical shifts must also be closely monitored. For instance, a prolonged period of global peace could reduce defense spending, or an unforeseen crisis could lead to a reduction in space development budgets.
Nonetheless, from a fundamental perspective, Kencoa Aerospace meets many criteria of a growth company: a solid order backlog, partnerships with major global customers, diversification of its business, and strong capital-raising capabilities. If, in three years, Kencoa achieves stable profitability with annual sales in the 200 billion KRW range and maintains healthy margins, the market is likely to assign a much higher multiple to its earnings. Therefore, for investors with a long-term horizon (three years or more), the current stock price represents an attractive entry point for an early-stage growth stock, assuming the company follows through on its growth plans.
11. Buy and Sell Strategies
Considering the analysis above, whether to buy Kencoa Aerospace now depends on the investor’s time horizon and risk tolerance. For long-term investors, purchasing at the current price may be worthwhile, especially if they are comfortable with a staggered buying approach. Given the substantial order backlog and favorable industry outlook, the company’s growth story appears credible. With earnings expected to surge around 2025–2026, the current valuation, when viewed through the lens of future performance, is not overly stretched. It is advisable for such investors to adopt a dollar-cost averaging strategy, buying in increments rather than all at once. For instance, if the stock becomes overheated and climbs above 15,000 KRW in the short term, it would be prudent to avoid chasing the price, and instead wait for a corrective phase where the support level appears in the 12,000–13,000 KRW range. The conversion price of the convertible bonds (13,995 KRW) could act as a technical support level; at that range, the risk of significant selling pressure from conversion is relatively low, making it a stable buying opportunity.
For short-term investors or traders, caution is advised given the recent sharp rise and subsequent consolidation. Those favoring a momentum trading approach might wait for a clear breakout signal – such as a new order announcement or a surprise earnings report – before entering a trade. Alternatively, traders aiming to capture short-term price swings might adopt a swing trading strategy: buying near short-term support levels (around 12,000 KRW) and selling on technical rebounds. However, due to the stock’s tendency for sudden price fluctuations, it is critical to set clear stop-loss levels. For example, if the key support at around 12,000 KRW breaks down, it might be best to cut losses promptly, and when the stock becomes overbought, consider taking partial profits using a phased selling approach.
Regarding the sell strategy, the decision should depend on the investor’s average purchase price and investment horizon. For those who entered at lower prices, holding until the earnings turnaround becomes evident in 2025 may be advisable, while partially realizing gains during periods of short-term overvaluation can secure profits. For instance, if the stock becomes excessively overvalued relative to earnings (e.g., PER above 30 times) around the time when earnings improvements become clear, gradual profit-taking could be considered. Conversely, new investors with a long-term view should set profit targets with a longer timeframe, perhaps holding for two to three years until the company’s market position significantly improves. Although there have been instances where the stock nearly doubled in a short period, long-term growth may involve several interim corrections. Therefore, adopting a patient, fundamental-driven approach and closely monitoring changes in the company’s performance is advisable.
In conclusion, Kencoa Aerospace is a stock where “growth is in sight, but volatility remains a challenge.” From a long-term perspective, there are strong arguments in favor of buying—provided one is willing to tolerate short-term volatility and adopts a staggered entry strategy. The optimal approach is to buy in increments when the price corrects and to sell gradually based on news and earnings momentum. In answer to the question “Should I buy it now?” the recommendation is: “Yes for long-term investors, but avoid short-term overbought levels by entering in stages.”
Sources: Key financial indicators (FnGuide), order backlog and growth outlook (Daishin/Yuanta Securities), stock price trends and related issues (Simply Wall St/Asia Economy), IPO and capital raising information (Business Post/E-Daily).
