[Click eStock] KT&G, Expected Impact of Lil Fit Japan Export

[Asia Economy Reporter Junho Hwang] Hana Financial Investment forecasted KT&G's annual sales and operating profit at 1.2267 trillion KRW and 340.7 billion KRW, respectively, maintaining the target stock price at 103,000 KRW. Sales are expected to increase by 4.1% year-on-year, and operating profit by 8.1%. These figures align with Hana Financial Investment's projections.

The total domestic tobacco demand (cigarettes + HNB) is expected to remain robust. Despite the seasonal low in the first quarter, demand is anticipated to maintain last year's level. KT&G's domestic cigarette market share is estimated to be around 64.3%.

Additionally, export cigarette sales (excluding the United States) are expected to increase by 10% year-on-year. Despite the strong Korean won, shipments to the Middle East have been in full swing since March, so the growth rate in the second quarter is expected to be higher than in the first quarter. Sales of overseas tobacco subsidiaries are also estimated to increase by 20% compared to last year, driven by strong sales in the United States. Exports of the PM-partnered heated tobacco product 'Lil Fit' are projected to have achieved significant growth as its entry into Japanese convenience stores expanded nationwide.

KGC's sales are expected to face pressure from last year's high base despite strong sales of gift sets.

Sim Eunju, a researcher at Hana Financial Investment, analyzed, "Despite these forecasts, strengthened ESG investments and relatively weakened dividend appeal compared to the past are believed to be negatively affecting supply and demand."