K2 and Cheongung exports offer leverage for KOTS Technology, maker of “weapon-system computers”

[Financial News] Research Aleum has highlighted KOTS Technology as a company localizing computers for weapon systems and set a fair value of 17,700 won per share. Based on the current share price of 10,520 won, the upside potential is 68.3%. As AI and unmanned systems drive up computing demand in weapon systems, equipment suppliers could also benefit if exports of the K2 and Cheongung-II expand, the firm said.
According to Research Aleum on the 26th, KOTS Technology supplies military computers used in land, sea and air weapon systems. Its major customers include LIG D&A and Hyundai Rotem, and it supplies 19 types of products for the K2 and five for the Cheongung-II. As weapon systems become more advanced and connect sensors, communications networks and armaments, the performance and importance of their onboard computers are also increasing. Research Aleum forecast that the global defense embedded systems market would grow from $2.2 billion in 2026 to $4.5 billion in 2035.
The high prices and long lead times of overseas products support demand for locally made alternatives.
Kim Do-yoon, an analyst at Research Aleum, said, “KOTS Technology has worked with systems companies from the development stage and is equipped to provide custom designs and meet delivery schedules.” He added, “The company unveiled an AI-enabled solution at MSPO in Poland last September and is also developing a next-generation single-board computer equipped with an NPU.” He went on to say, “A shift to high-performance products could open up opportunities to raise unit prices and export directly overseas.”
Profitability rebounded in the second quarter. The operating margin fell to 8.1% in the first quarter amid the burden of raw material costs, depreciation on its new headquarters and an expansion of its R&D workforce, but rose to 12.0% in the second quarter, helped in part by revenue recognition for products for export. Research Aleum expects the effects of export volumes and passing higher raw material costs on to selling prices to continue in the second half. The move to its new headquarters increased annual production capacity to as much as 120 billion won.
Overseas contracts for systems companies are key to expanding orders. Hyundai Rotem is preparing an additional K2 contract with Poland and is also in talks with Romania, Iraq and other countries. Analyst Kim explained, “LIG D&A is discussing exports of the Cheongung-II to Qatar and Kuwait, with Romania and Croatia also among the parties in negotiations.”
As there is a time lag between systems companies signing contracts and component suppliers receiving orders, Research Aleum said these projects could translate into new orders for KOTS Technology from 2027 onward if they move to definitive contracts. The company also secured an order worth 14.77 billion won in its marine business last October.
Research Aleum estimates the company’s 2026 revenue at 78.3 billion won and operating profit at 8.7 billion won. It calculated the fair value by applying a target P/E of 12 to estimated 2026 earnings per share of 1,477 won. Kim added, “We applied a multiple below the comparable companies’ average P/E of 18, while taking into account the growth potential from expanding defense exports and localization.”


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