[Click eStock] "Kia Motors, New Car Effect Fully Realized This Year"

[Asia Economy Reporter Song Hwajeong] SK Securities expects Kia Motors' new car effect to be in full swing this year and maintained a 'Buy' investment rating and a target price of 52,000 won.

Kwon Sunhoo, a researcher at SK Securities, said, "Considering that this year, along with the expansion of vehicles launched last year, major volume models such as Sorento, Carnival, and Sportage are scheduled to be released, profitability is expected to continue improving," adding, "The low base effect due to sluggish domestic demand in the first half of last year also reduces the burden."

Kia Motors' fourth-quarter performance last year exceeded market expectations. Kia's fourth-quarter sales increased by 19.5% year-on-year to 16.1 trillion won, and operating profit rose 54.6% to 590.5 billion won. Researcher Kwon analyzed, "The sales, which significantly exceeded market expectations, were contributed by increased wholesale sales excluding China, favorable exchange rate effects, an increase in average selling price (ASP) through new car launches, and a reduction in incentives," adding, "Operating profit also continued to improve profitability due to the combined effect of increased scale and cost reduction." He added, "The improving cost ratio is also a factor that enhances the visibility of profitability this year, but non-operating losses were recorded due to the poor performance of the Chinese subsidiary."

He expressed the opinion that focus on ASP is necessary this year as well. Researcher Kwon said, "Except for the increase in production at the India plant, sales targets have been set somewhat conservatively, but this year, focus should be placed on ASP through mix improvement and cost reduction rather than volume (Q)," explaining, "Last year, despite global demand sluggishness and vehicle aging, Kia recorded profitability improvement based on inventory reduction effects through decreased production volume, a favorable exchange rate environment, and strong new car sales."