[Click eStock] Kia, H2 New Car Momentum 'Target Price Raised'

[Asia Economy Reporter Lee Seon-ae] Hyundai Motor Securities has maintained its 'Buy' rating on Kia and raised the target price from the previous 110,000 KRW to 120,000 KRW. The target price is set at a level that applies a 10% premium to the five-year average of past price-to-earnings ratio (PER), price-to-book ratio (PBR), and EV/EBITDA multiples based on the expected 2021 earnings. The implied PER of the target price is 10.0 times.

According to Hyundai Motor Securities on the 27th, Kia's Q2 2021 earnings exceeded consensus operating profit estimates by 8%. The company posted Q2 sales of 18.4 trillion KRW (+61% yoy), operating profit of 1.49 trillion KRW (+925% yoy), operating margin of 8.1% (+6.8%p yoy), and net profit of 1.34 trillion KRW (+963% yoy). In terms of quarterly operating margin, this is the first time in eight years since Q2 2013's 8.6% that Kia has recorded an operating margin in the 8% range.

Production disruptions in the first half due to semiconductor supply shortages are estimated at about 60,000 units. Inventory has decreased from around 530,000 units at the end of last year to 420,000 units currently. Lee Sang-hyun, a researcher at Hyundai Motor Securities, emphasized, "The outlook for gradual improvement in semiconductor supply in the second half remains valid," adding, "New car momentum such as the EV6 and Sportage is expected to continue in the second half."

In particular, the electric vehicle EV6 is scheduled for release in Korea at the end of July, Europe in October, and the United States in February next year. Domestic pre-orders reached 32,000 units, more than double the target. In Europe, after the EV6 world premiere, about 7,300 reservations were recorded, and the number of prospective buyers was estimated at 33,000. In the U.S., the limited pre-order quantity of 1,500 units was sold out, indicating a positive response to Kia's first electric vehicle applying the E-GMP platform.