[Click eStock] "Innocean, Positive Factors Concentrated in Q2 and Q3"

Daishin Securities "Target Price 90,000 KRW, Maintain 'Buy' Rating"
Hyundai and Kia Electric Vehicle Marketing and Kia CI Change Act as Positive Factors

[Asia Economy Reporter Gong Byung-sun] Although the captive special demand from affiliates did not materialize in the first quarter of this year as expected, there is an analysis that Innocean's positive factors have concentrated in the second and third quarters. Hyundai Motor and Kia's electric vehicle (EV) marketing and Kia's corporate logo (CI) change-related work are scheduled to begin from the second quarter.

On the 8th, Daishin Securities maintained a target price of 90,000 KRW and a 'Buy' rating for Innocean. Daishin Securities calculated the target price by applying a price-earnings ratio (PER) of 20 times to the 12-month forward earnings per share (EPS) of 4,277 KRW. The PER of 20 times is the average over the past five years.

Innocean's performance in the first quarter of this year fell short of expectations. The gross profit in the first quarter was 150 billion KRW, down 14% from the previous quarter. Operating profit also recorded 20.1 billion KRW, showing a 51% decline compared to the previous quarter. The reason for the underperformance was the burden of achieving record-high results and the expectation that captive special demand would occur from the second quarter. However, Kim Hee-jae, a researcher at Daishin Securities, said, "Since the annual scale of captive marketing has not decreased, the annual performance outlook remains unchanged."

Investment points are expected to concentrate from the second quarter. First, with the expected launch of the Genesis electric vehicle model in the first half of the year, Genesis marketing is also expected to be in full swing. Hyundai Motor's Ioniq 5 and Kia's EV are scheduled for domestic release followed by overseas release in the second half, so performance is expected to be concentrated in the second and third quarters. Kia's CI change is also a positive factor. In January, Kia unveiled a new CI. Accordingly, the CI of domestic and global dealerships must be replaced, which will take some time. Researcher Kim said, "The CI replacement work will continue until the first half of the year," adding, "Some related revenue was reflected in the first quarter of this year, and most is expected to be recognized in the second quarter."

Accordingly, Daishin Securities expects Innocean to achieve its best quarterly performance in the second quarter. Researcher Kim explained, "Innocean's gross profit in the second quarter of this year is expected to reach 160 billion KRW, and operating profit 29.7 billion KRW," adding, "Looking at the first half as a whole, gross profit is projected at 300 billion KRW and operating profit at 50 billion KRW."