[Click eStock] "Hankook Tire Posts Surprise Q3 Operating Profit... Target Price Up 27%"

[Asia Economy Reporter Park Jihwan] Korea Investment & Securities maintained a 'Buy' rating on Hankook Tire & Technology on the 3rd, citing a surprise performance including the recovery of operating profit to the 200 billion KRW level in the third quarter of this year, and raised the target price by 27.3% from the previous 33,000 KRW to 42,000 KRW.

Jinwoo Kim, a researcher at Hankook Tire, stated, "The Hankook Tire we knew has returned," adding, "The third-quarter performance, including the recovery of operating profit to the 200 billion KRW level after 12 quarters, significantly exceeded the consensus and estimates by 50% and 57%, respectively."

The operating profit was 224.7 billion KRW, an increase of 24.6% compared to the previous year. This is attributed to the recovery of sales due to the resumption of economic activities and an improvement in the mix. Although original equipment (OE) tires for new cars are still affected by COVID-19, replacement tires (RE) demand showed a strong rebound. Additionally, orders for electric vehicle-specific tires have steadily increased, proving competitiveness, according to researcher Kim.

Researcher Jinwoo Kim explained, "Detailed operating indicators show a fundamental recovery," and "In Europe and North America, where profitability is high, sales volume increased more than the market, leading to a rise in market share." In particular, the mid-to-low-end tire brand Laufenn is also experiencing significant sales growth. Sales are expected to increase to 5.8 million units in 2020 due to strong sales in Europe (+13%), North America (+57%), and domestically (launched this year).

He added, "With sales improvement, inventory assets have also turned to a declining trend, and raw material input costs are decreasing," noting that "distribution channels, Hyundai Motor OE, and domestic market share, which were negative factors, are gradually being resolved, while sales normalization and electric vehicle competitiveness are acting as additional momentum."