Korea Aerospace Industries stock faces a cash-flow test

Published on 10/30/2026 at 01:37 | Editorial responsibility: Rafael Müller, Editor-in-Chief AD HOC NEWS

Korea Aerospace Industries stock faces pressure from cash burn, rising borrowings and weak order intake. The KF-21 ramp-up is central to the outlook.

KAI faces a demanding financial test

Operating cash flow remained negative for a third consecutive year, while inventory investment increased the financing burden.
First-half orders reached only a small share of the full-year target, and profitability weakened despite higher revenue.
The company needs new contracts and successful KF-21 production execution to support cash flow and future growth.

KAI, KR7047810007, Illustration mit AI erstellt.

Korea Aerospace Industries is entering a demanding phase as investment for new defense programs weighs on cash generation, borrowing and profitability. In a report published on October 23, Korea Financial Times said the company was facing a growing financial burden despite the broader defense-export boom.

Cash remains the central concern

The report said KAI's operating cash flow was negative for a third consecutive year through 2025. The cumulative outflow over 2023 to 2025 reached 2.3319 trillion Korean won, while first-half cash flow in 2026 remained negative at 380.0 billion won.

Inventory was identified as a key driver. It increased from 1.7365 trillion won at the end of 2023 to 3.9926 trillion won at the end of June 2026, including 2.1557 trillion won in work in progress. Gross borrowings, including bonds, reached 2.9801 trillion won at the end of June, compared with 1.0357 trillion won at the end of 2024.

Orders have not kept pace

New orders in the first half totaled 629.5 billion won, equal to 6.0% of KAI's full-year target of 10.4383 trillion won. The second-quarter order intake fell 89.9% from a year earlier to 319.4 billion won, although the company said major domestic and export contracts could be signed during the second half.

The separate-basis order backlog also declined to 25.7502 trillion won at the end of June from 27.3437 trillion won at the end of 2025. The report noted that domestic defense, complete-aircraft exports, components and satellite activities all recorded lower backlogs.

Revenue growth came with weaker margins

First-half revenue rose 48% year on year to 2.2606 trillion won, but operating profit fell 12.5% to 115.6 billion won. The operating margin declined to 5.1% from 8.6% a year earlier. In the second quarter, operating profit fell 43.1% to 48.4 billion won and the operating margin dropped to 4.1%.

Delivery disruptions affecting the Light Armed Helicopter were cited by brokerages as a factor behind the weak second-quarter performance. KAI said that the start of domestic KF-21 deliveries in the second half would allow mass-production revenue to be reflected more fully. For investors, execution on deliveries, new contract awards and working-capital control are therefore key variables rather than revenue growth alone.