Securities Industry Q2 Operating Profit Forecast at 1.26 Trillion Won
Extension of Excise Tax Cut in Second Half Also a Positive Factor
On the 9th, Kia's electric vehicle EV6 was exhibited at 'InterBattery and 2021 xEV Trend Korea' held at COEX in Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@
[Asia Economy Reporter Minji Lee] Expectations are rising for the "100,000 Kia" as Kia is projected to post operating profits exceeding 1 trillion won in the second quarter, driven by expanded new car sales and sustained demand for automobiles.
According to financial information firm FnGuide on the 9th, Kia's expected operating profit for the second quarter is 1.26 trillion won. This is the average estimate from domestic securities firms, representing a 767% increase compared to 145.2 billion won in the second quarter of last year. It is also forecasted to rise 16% compared to the previous quarter's 1.08 trillion won. Kiwoom Securities predicted profits close to 1.4 trillion won, while Meritz Securities projected around 1.37 trillion won in operating profit.
The reason securities firms made these estimates is the expansion of automobile sales centered on new models. The K8 and EV6, unveiled in the first half of this year, have been recognized for their superior quality compared to competitor models such as the Grandeur and Ioniq 5, receiving favorable reviews from consumers. Monthly contract numbers in the domestic market have grown from an average of 3,000 units in the first quarter to about 4,000 units currently. With the recent extension of the individual consumption tax reduction for automobiles by six months, maintaining it until December, automobile purchase demand is expected to increase further. In the second half of the year, the new compact SUV Sportage, which has a higher selling price, is expected to peak the new car cycle. The Sportage was the best-selling single model last year with 310,000 units sold.
Minseon Kim, a researcher at Kiwoom Securities, analyzed, "If the annual global sales volume is estimated at 400,000 units, the increase in operating profit will reach 700 billion won," adding, "The sales growth of small SUVs centered on the Seltos continues, which will drive Kia's quantitative growth."
The impact on production due to the shortage of automotive semiconductors was relatively less severe. Comparing only with domestic competitor Hyundai Motor Company, Hyundai sold about 62,000 units in the domestic market, a 12% decrease from the previous month due to semiconductor parts shortages, whereas Kia sold 48,000 units, a 6% decrease, showing relatively better performance. During the same period, global automakers reportedly reduced monthly production by 30,000 to 40,000 units.
As the outlook for earnings upgrades rises, the previously sluggish stock price is also showing an upward trend. After soaring to 100,000 won in February on rumors of cooperation with Apple Car, the stock price hovered around 70,000 to 80,000 won for four months but surged 7% this month, raising the price to the 90,000 won level. Buying momentum continued mainly among foreigners and institutions, with net purchases this month amounting to 405.6 billion won, the second highest. Meritz Securities, which presented the highest target price in the securities industry, predicted that Kia could reach 130,000 won and set off another record high.
Researcher Junseong Kim of Meritz Securities explained, "Since the second quarter of last year, Kia's annual operating profit estimates for this year and 2022 have shown a stepwise upward trend with each earnings announcement," adding, "With the explosive growth of the global battery electric vehicle (BEV) market continuing, Kia can rapidly expand its market share domestically and in Europe once EV6 sales begin, enabling valuation expansion."
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