[Click eStock] "Kia, Profitability Protected by Strong Demand... Target Price Up"

Target Price Revised Upward from 115,000 Won to 140,000 Won

DB Financial Investment on the 28th raised the target price for Kia from the previous 115,000 KRW to 140,000 KRW, citing that solid demand is protecting profitability. The investment rating was maintained as 'Buy.'

Kim Pyeongmo, a researcher at DB Financial Investment, said, "Kia's forward price-to-earnings ratio for 2024 is 5.5 times, below the competitors' average of 6.6 times," adding, "Kia plans to continuously expand shareholder return policies such as dividend increases and share buybacks, making it still an attractive segment solely based on valuation and expanded shareholder returns."

Kia's first-quarter earnings this year are expected to meet market forecasts. Researcher Kim said, "Kia's first-quarter earnings are expected to align with consensus (average securities firm forecasts), with sales increasing by 7% year-on-year to 25.2636 trillion KRW and operating profit decreasing by 7% to 2.6832 trillion KRW," explaining, "Although profitability is expected to be weaker year-on-year due to negative factors such as decreased domestic sales and increased incentives deepening from the previous quarter, a weak Korean won and steady wholesale sales in the North American region will maintain an operating profit margin in the 10% range." Considering cumulative sales in February, first-quarter U.S. wholesale sales are projected to remain at a similar level to the same period last year, around 200,000 units.

Although profitability-related indicators are deteriorating, attention should be paid to the fact that demand in key regions is showing a stable recovery trend. Researcher Kim said, "Demand for light vehicles (Light Vehicle: passenger and commercial vehicles with a load capacity of 6 tons or less) in the U.S. increased by 5% year-on-year through February, and industrial demand in Europe grew by 11% during the same period," explaining, "Although market share in the U.S. and Europe slightly decreased due to lower incentives compared to competitors, wholesale and retail sales are still maintaining an upward trend." He added, "Positive factors for profitability are gradually increasing due to the intensified weakness of the Korean won compared to previous forecasts." DB Financial Investment raised its operating profit estimate for Kia this year by 2% considering the weak Korean won.