[Click eStock] "K Car, Growth Amid Used Car Slump... Benefiting from Corporate Business Participant Involvement"

NH Investment & Securities Report

[Asia Economy Reporter Kwangho Lee] NH Investment & Securities stated on the 20th that K Car is expected to attract attention as sales growth continues despite the domestic used car industry's downturn, with corporate business operators' participation becoming more active in 2023. No investment or buy recommendations were given on this day. K Car's closing price on the 19th was 13,600 KRW.

Researcher Younghoon Joo of NH Investment & Securities said, "The number of domestic used car ownership transfers (cumulative from January to November) this year was 2.33 million units, a 4.3% decrease compared to the previous year," adding, "This is presumed to be due to the contraction of used car trading sentiment caused by interest rate hikes and economic slowdown concerns, which negatively affects K Car's business environment."

He stated, "The reason the Korean used car industry has not been as active compared to major global countries is due to opacity, so if corporate business operators' participation becomes full-fledged, K Car is expected to benefit as well."

He forecasted that K Car's market share, currently at about 5%, will rise to 10% by 2025. Sales and operating profit for 2023 are estimated at 2.5 trillion KRW and 72.3 billion KRW, respectively, representing increases of 9% and 31% compared to this year.

Researcher Joo said, "Based on the advantage of being able to provide services across all areas both online and offline, we expect higher performance compared to the industry average," and added, "As profit per vehicle has recently improved, profitability indicators are also expected to improve."

He explained that the situation differs from Carvana, known as the Amazon of the used car industry. The stock prices of Carvana and Vroom, leading global online used car sales companies, have fallen 98% and 90% respectively since the beginning of the year, negatively impacting K Car's stock price and valuation as well.

He added, "These companies are experiencing liquidity crises due to expanding losses in their core used car sales business and increased interest expenses from interest rate hikes, but K Car, based on stable operating profits and even implementing quarterly dividends, does not face significant liquidity-related risks."