[Click eStock] "Kia, Market Share Expansion Through Production Increase... ASP Rise"

Hana Securities Report

[Asia Economy Reporter Kwangho Lee] Hana Securities analyzed that Kia will prove its improved fundamentals through increased production leading to higher market share and utilization rates, as well as maintaining mix effects. The investment opinion remains Buy, with a target price of 90,000 KRW.

Song Seonjae, a researcher at Hana Securities, stated, "Although the exchange rate will be negative this year, maintaining low incentives combined with additional mix effects will cause the Average Selling Price (ASP) to rise slightly."

Kia's Q4 performance last year exceeded expectations. Global wholesale sales and wholesale sales excluding China increased by 13% and 16% respectively compared to the same period last year. Sales increased in most regions except China and Russia. In North America and India, sales surged by 32% and 63% respectively.

[Image source=Yonhap News]

Researcher Song noted, "Both mix and exchange rates were favorable along with sales growth," adding, "The proportion of North America, where prices are relatively higher, rose from 33.3% to 39.5%, and by vehicle segment, the share of Recreational Vehicles (RV) increased from 57.9% to 66.8%."

He continued, "Operating profit increased by 1.45 trillion KRW, contributed by volume growth, price effects, and incentive reductions, while the exchange rate effect accounted for 840 billion KRW."

Kia set its wholesale sales target for this year at 3.2 million units, a 10.3% increase. Production and retail sales are expected to rise by 11.4% and 8.7% to 3.26 million and 3.15 million units respectively. Revenue is targeted to increase by 12.7% to 97.6 trillion KRW, operating profit margin to rise by 1.2 percentage points to 9.5%, and operating profit to grow by 28.6% to 9.3 trillion KRW.

He also said, "Kia's current Price-to-Earnings Ratio (PER) is low at 4 times valuation, and the dividend yield of 5.1% (3,500 KRW per share), along with a shareholder return policy including approximately 500 billion KRW of annual share buybacks over the next five years, representing 1.8% of issued shares, and cancellation of 50% of repurchased shares, is positive."