[Click eStock] "KT&G, Fundamental Recovery Accelerates in the Second Half"

[Asia Economy Reporter Oh Ju-yeon] Hana Financial Investment evaluated KT&G on the 1st, stating that its performance will become more prominent in the second half of this year, and the accounting violation issue has also passed the halfway point, with concerns gradually being resolved.

Hana Financial Investment estimated that KT&G's consolidated operating profit for this year will increase by 5.2% compared to the previous year. By quarter, it is expected to decrease by 7.6% in the second quarter compared to the previous year, but increase by 14.9% and 30.9% in the third and fourth quarters, respectively. This is because negative effects due to poor performance in the duty-free channel are inevitable until the second quarter.

Researcher Shim Eun-joo said, "As the domestic cigarette market share is maintained around 64% in the second half of the year due to strong sales of new products, exports to the Middle East are becoming visible from the second quarter," adding, "Considering that there were no exports to the Middle East in the second half of last year, a base effect can be expected."

She also judged that sales from the Suwon site land sale will expand in the second half as the progress rate increases. Researcher Shim said, "The annual related sales this year are expected to exceed 500 billion KRW." She also anticipated that exports of heated tobacco products to Philip Morris could become visible as early as the third quarter.

Regarding the accounting violation issue, she diagnosed that the halfway point has been passed.

Researcher Shim said, "The Audit Committee, an accounting expert organization under the Financial Services Commission, concluded that there was no intentional violation regarding KT&G's accounting standards breach," and analyzed, "If the Audit Committee's conclusion is finalized through the Securities and Futures Commission and the Financial Services Commission, KT&G will avoid prosecution."

She explained that since the Korea Exchange can only suspend trading and subject companies to a delisting suitability review if they have been reported to the prosecution, concerns about market measures will also disappear.

Researcher Shim added, "According to KT&G's shareholder policy, this year's DPS (dividend per share) will be at least at last year's level," and added, "Based on the 2019 DPS, the current dividend yield exceeds 5%."