[Click eStock] "Hankook Tire, Balanced Portfolio and Price Increase... Weight Expansion Strategy Valid"

[Asia Economy Reporter Kwon Jae-hee] IBK Investment & Securities maintained a 'Buy' rating on Hankook Tire & Technology on the 25th, setting a target price of 54,000 KRW.

Hankook Tire & Technology reported first-quarter results with sales of 1.7907 trillion KRW and operating profit of 126.1 billion KRW. Sales increased by 11% year-on-year, while operating profit decreased by 32%. However, the operating profit exceeded consensus estimates, and thanks to price increases and favorable exchange rate effects, the company performed better than market concerns suggested.

Researcher Lee Sang-hyun of IBK Investment & Securities analyzed, "Tire sales declined compared to the same period last year due to global logistics disruptions, ongoing semiconductor shortages, and the resurgence of COVID-19, but sales increased due to mix improvement, price hikes, and favorable exchange rates." However, operating profit decreased due to increased raw material and logistics costs and the cost impact from domestic factory strikes.

Hankook Tire & Technology raised prices in response to rising raw material costs and competitor price increases, increasing prices by 3-10% in Korea, 4% in Europe, and 6-8% in North America in the first quarter of this year. They plan to further increase prices by 4-10% in Europe and around 4% in North America from the second quarter onward. Additionally, they are expected to launch ION, an electric vehicle-exclusive tire brand, introducing the world's first full lineup of tires dedicated to electric vehicles.

Researcher Lee said, "With a balanced local production portfolio limiting the burden of rising logistics costs, mix improvement and ASP (Average Selling Price) increases are being realized, so margin improvement is expected. As cost stabilization is anticipated in the future, margin spreads are expected to widen further, so a strategy to increase weighting during ASP hikes is considered effective."