If you like Boeing (NYSE: BA), then Asia's huge demand for military helicopters would excite you. After bagging a massive $22.5 billion commercial aircraft contract from Indonesia's Lion Air, Boeing is now set to conquer the military helicopter market in Asia. Here's how...
Destination Asia
There is a wave of military chopper demand coming from several Asian countries, which should be good news for Boeing. Many of these countries have been postponing the purchase of choppers for quite some time now, resulting in a collectively huge inevitable demand, which could translate into orders worth $10 billion over three years.
Defense requirements of Asian countries such as India and South Korea range from combat to heavy-lifting helicopters. Boeing will be pitched against peer Textron (NYSE: TXT) among other international players for these tenders. While it may be too early to decide on the winner, I think Boeing's technology and ongoing relationship with most of these countries should provide the required competitive edge.
The need and suitability equation
India and South Korea require 22 and 36 attack choppers, respectively, and the potential bidders for these tenders include Boeing's Apache and Russia's Mil Mi-26 Havoc, besides Textron's Bell 429 and Eurocopter's Tiger choppers. However, with India already preferring the Apache because of its versatility and advanced technology, Boeing is already one up on its rivals. The country may extend its order to 44 helicopters in the future.
Next, India requires 15 heavy-lifting helicopters, a tender for which Boeing will once again compete against a Russian chopper -- Mil Mi-26 Halo. Interestingly, the heavy-lifting chopper offered by Boeing, Chinook, is the one that's been used in the hilly areas during the Afghanistan War. This makes Chinook a suitable choice for India, which could use the helicopter in the high altitudes of the Himalayas.
Foolish look at the future
Boeing's product offerings and their suitability make it the obvious choice. The exact revenue that can be generated by these orders is not known. However, if Boeing manages to secure a significant portion of these Asian orders (something I am very optimistic about), the consequent revenue addition and greater exposure to Asian markets should make this a stock to watch out for.
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Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
