[Into the Stock] K Car Truly Rises Thanks to Goldman Sachs

Korean Used Car Market Expected to Rise, Surging 60% Above Opening Price
Initially Overlooked at Listing, But Rose Over 44% in the Past Week

[Asia Economy Reporter Song Hwajeong] K Car rose more than 44% over the past week, marking the largest increase among KOSPI stocks. Although K Car did not attract much attention at the time of its listing last month, it suddenly surged, drawing significant market attention largely due to a Goldman Sachs report.

As of 9:10 a.m. on the 29th, K Car was trading at 34,400 KRW, down 1,650 KRW (4.58%) from the previous day. Possibly due to fatigue from the recent surge, the stock has taken a breather after rising for five consecutive days from the 19th to the 25th.

K Car, the leading used car platform company in Korea, was listed on the KOSPI market on the 13th of last month. The public offering price was set at 25,000 KRW, which was a 27% discount compared to the lower end of the expected price band at 34,300 KRW. K Car's institutional demand forecast ratio was 37 to 1, the lowest among IPO companies this year, and the general subscription competition ratio was also weak at 8.72 to 1. On the first day of listing, the opening price was 22,500 KRW, lower than the public offering price, and it closed at 23,000 KRW. For a month after listing, the stock price hovered between 23,000 and 25,000 KRW.

The atmosphere changed dramatically due to the Goldman Sachs report. On the 23rd, Goldman Sachs issued a report setting a target price of 85,200 KRW for K Car, which is more than three times the current stock price. The report projected that the Korean used car market would grow to 48 trillion KRW by 2030, and that K Car would expand its market share to 11.2% by 2030 through the growth of the online car market, narrowing the market capitalization gap with global peers.

The stock price reacted immediately to Goldman Sachs' outlook. On the day the report was released, the 23rd, K Car hit the daily upper limit. It rose for five consecutive days from the 19th to the 25th, gaining more than 55% during this period. Compared to the opening price, it increased by over 60%.

However, there is an interpretation that the unusually favorable report on a stock that does not even rank within the top 100 by market capitalization was influenced by the fact that K Car was a client of Goldman Sachs. At the time of K Car's IPO, Goldman Sachs was a joint lead manager along with NH Investment & Securities.

Domestic securities firms also have a positive outlook. Yuanta Securities forecasts K Car's sales this year to increase by 40.3% year-on-year to 1.9 trillion KRW, and operating profit to nearly double, rising 98.9% to 78 billion KRW. An Juwon, a researcher at Yuanta Securities, said, "In 2022, favorable business conditions will lead to high growth exceeding 30%. Recently, U.S. used car companies are also expanding online sales and leading the market, and with the positive stock price trend, K Car's stock price is expected to rise accordingly." Yuanta Securities set a target price of 35,000 KRW for K Car.

Choi Jongkyung, a researcher at Heungkuk Securities, commented on K Car, "It is evaluated as having successfully integrated the fragmented used car industry and established high entry barriers for 'used car e-commerce.'" He added, "The current stock price is below even the upper end of the initial public offering price range, which should be noted." Heungkuk Securities initiated coverage on K Car with a 'Buy' rating and a target price of 53,000 KRW.